2. Board, Subcommittees And Directors Flashcards
The Board’s responsibilities include establishing the v—, m— and v— of the organisation
Vision
Mission
Values
The Board’s responsibilities include setting the organisation’s s— and s—
Strategy
Structure
The Board’s responsibilities include ensuring the availability of — — — for the achievement of strategy and objectives
Adequate financial resources
The Board’s responsibilities include — resources and work to management
Delegating
The Board’s responsibilities include exercising — to the shareholders
Accountability
The Board’s responsibilities include being responsible to st—
Stakeholders
What are the two main board structures?
Unitary and dual
The unitary board is a single board composed of…
Executive and non-executive directors
In the unitary board, the — runs the board
Chairman
In the unitary board, the — — — manages the day to day operations of the company
Chief executive officer
Who elects directors to the unitary board?
Shareholders
A benefit of the unitary board model is that all — are made and ratified in one forum
Decisions
A benefit of the unitary board structure is that a closer and more effective — exists between all board members
Relationship
A benefit of the unitary board structure is that the — — — between board members is improved
Flow of information
A unitary board is — to operate than a dual board
Simpler
A dual board consists of what two structures?
The supervisory board
The management board
In a dual board structure, the — — is responsible for running the organisation
Management board
In a dual board structure, the — — is responsible for directing the business
Supervisory board
In a dual board structure, the management board is run by the — — —
Chief executive officer
In a dual board structure, the management board consists entirely of — —
Executive directors
In the dual board structure, the supervisory board is run by the —
Chairman
The supervisory board usually consists entirely of what?
Non-executive directors
Who usually appoints members to the supervisory board?
Shareholders
What is the main benefit of the dual board structure?
It clarifies responsibilities
What is the main disadvantage of the dual board structure?
It can be bureaucratic and unwieldy
Which UK report examined the advantages and disadvantages of the different board structures?
The Owen Report 1995
What are the three main conclusions of the Owen report?
Supervisory board unable to effectively monitor the activities of management
Supervisory boards usually meet infrequently and do not receive sufficient information
Excessive conflicts of interest caused by different stakeholders on the supervisory board
According to the Owen Report 1995, supervisory boards are unable to effectively — the activities of management
Monitor
According to the Owen Report 1995, supervisory boards usually meet —, and do not receive sufficient — about the day to day operations of the company
Infrequently
Information
According to the Owen Report 1995, there are often excessive — — — on the supervisory board due to many differing stakeholders
Conflicts of interest
What is now the main code regarding corporate governance in the UK?
UK Corporate Governance Code 2010
What are the five key sections of the UK corporate governance code 2010?
Leadership Effectiveness Accountability Remuneration Shareholder relations
(LEARS)
The Code consists of main and supporting p—, and p—
Principles
Provisions
Code principles. Under section A, Leadership, the first main principle states that every company should be headed by an — — which is collectively responsible for the long-term success of the company
Effective board
In the Code, to what does main principle A.1 relate?
The role of the board
List the headings of the four main principles of section A of the Code
A.1 The Role of the Board
A.2 Division of Responsibilities
A.3 The Chairman
A.4 Non-executive Directors
Code Principles. Under section A, Leadership, the second main principle states that there should be a clear — — — at the head of the company between the running of the board and the running of the business
Division of responsibilities
Code principles. Under section A, Leadership, the third principle states that the — is responsible for the leadership of the board, and ensuring its effectiveness
Chairman
Code principles. Under section A, Leadership, the fourth principle states that non-executive directors should — — and help develop proposals on —
Constructively challenge
Strategy
Code provisions. Provision A.1.1. states the the board should meet sufficiently —- to discharge its duties effectively
Regularly
Code provisions. Provision A.1.1. also states that there should be a formal — — — reserved for the board
Schedule of decisions
Code provisions. Provision A.1.2. states that who should be identified in the annual report?
Chairman Deputy chairman Chief executive Senior independent director Chairmen and members of committees
Code provisions. Provision A.1.2. states that the — — — of the board and its committees should be set out in the annual report
Number of meetings
Code provisions. Provision A.1.2. states that the individual — of directors should be set out in the annual report
Attendance
Code provisions. Provision A.1.3. states that — should be arranged in respect of legal action against the directors
Insurance
Code provisions. Provision A.2.1. states that the roles of — and — — should not be exercised by the same person
Chairman
Chief executive
Code provisions. What three things does provision A.2.1. state regarding the division of responsibilities between chairman and chief executive
Clearly established
Set out in writing
Agreed by board
Code provisions. Provision A.3.1. states that a — — should not go on to become — of the same company
Chairman
According to provision A.3.1. of the Code, how should the board act in the event that they decide the chief executive should go on to be chairman?
Consult major shareholders in advance
Set out reasons to shareholders at time of appointment
Set out reasons in next annual report
Code provisions. Provision A.4.1. states that the board should appoint a — — —
Senior Independent Director
Code provisions. Provision A.4.2. states that the chairman should hold meetings with non-executive directors without the — present
Executives
Code provisions. Provision A.4.2. states that the SID should at least annually lead a meeting of non-executive directors without chairman present to assess the —’s performance
Chairman
What are the seven main subheadings of the second section of the Code (Effectiveness)?
B.1 Composition of the Board B.2 Appointments to the Board B.3 Commitment B.4 Development B.5 Information and Support B.6 Evaluation B.7 Re-election
Code Principles. Principle B.1 states that the board and it’s committees should have the appropriate balance of —, —, — and — of the company to enable them to discharge their duties and responsibilities effectively.
Skills
Experience
Independence
Knowledge
(SExInK)
What do the supporting principles to B.1 of the Code (Composition of the Board) say about the SIZE of the board?
Sufficient for business needs
Change manageable without disruption
Not so large as to be unwieldy
According to the Code, the size of the board should be sufficient for — —
Business purposes
What do the supporting principles to B.1 of the code (Composition of the Board) have to say about the COMPOSITION of the board?
Balance of executives and non-executives
No individual or group should be able to dominate decision making
What do the supporting principles to B.1 of the Code (Composition of the Board) have to say about committee meetings?
Only chairman and members should be able to attend committee meetings
Others may attend at invitation of committee
Code Provisions. Provision B.1.1 states that the board should identify — non-executive directors in its annual report
Independent
Code Provisions. Provision B.1.1 also states that the board should determine what three things about its non-executive directors?
Independent in character
Independent in judgment
Free from relationships or circumstances that might impair their judgment
Code Provisions. According to Provision B.1.1, how should the board act where a NED’s circumstances seem to indicate that he is not independent?
Should state their reasons to shareholders and in the annual report
Code Provisions. What six examples does Provision B.1.1 give of circumstance that may impair a non-executive director’s judgment?
Employed by company or group in last five years
Material business relationship with company in last three years
Has received additional remuneration other than director’s fee
Close family ties with company’s advisors, directors or senior employees
Represents a significant shareholder
Has served on board more than nine years since first election
Code Provisions. According to Provision B.1.2, what proportion of the board, excluding the chairman, should comprise non-executive directors? (Except for smaller companies)
At least half
Code Provisions. According to Provision B.1.2, a smaller company should have at least — non-executive directors
Two
Code Provisions. How does Code Provision B.1.2 define a “smaller company”?
One that is below the FTSE 350 throughout the year immediately prior to the reporting year.
Code Principles. Principle B.2 states that there should be a —, — and — procedure for the appointment of new directors to the board.
Formal
Rigorous
Transparent
The supporting principles to Code Principle B.2 state that the search for candidates and board appointments should be made on what three bases?
On merit
Against objective criteria
With regards to the benefit of diversity, including gender
The supporting principles to Code Principle B.2 state the board should satisfy itself that orderly — — is in place for appointments to the board.
Succession planning
The nomination committee leads the process for — —
Board appointments
Code Provisions. According to Provision B.2.1, the majority of members of the nomination committee should be what?
Non-executive directors
Code Provisions. According to Provision B.2.1, who should chair the nomination committee?
The Chairman or an independent non-executive director
Code Provisions. According to Provision B.2.1, when must the chairman of the board NEVER chair the nomination committee?
When appointing a successor to the chairmanship.
Code Provisions. According to Provision B.2.2, the nomination committee should evaluate the level of what four things on the board when searching for new candidates?
Skills
Experience
Independence
Knowledge
(SExInK)
Code Provisions. According to Provision B.2.2, when searching for a new candidate, the board should prepare a description of the — and — required for the particular appointment.
Role
Capabilities
Code Provisions. According to Provision B.2.3, non-executive directors should be appointed for specified —
Terms
Code Provision. According to Provision B.2.3, when a non-executive director has been appointed for a term exceeding six years, the appointment should be subject to — —
Rigorous review
Code Provisions. According to Provision B.2.3, the appointment term of a non-executive director is subject to what two qualifiers?
Re-election
Statutory provisions relating to the removal of a director
According to the Institute of Directors, what is the key purpose of the Board?
To ensure the company’s prosperity
By collectively directing the company’s affairs
While meeting the appropriate interests
Of its shareholders and relevant stakeholders
