Board membership, roles and appontment of direcrors Flashcards
types of board
- unitary boards- have one single governing body
- Two-tier board- has a management board comprising of typical executives and a supervisory board comprising of non executive members
- Advisory body- made up of business leaders, prominent leaders politicians and other influential people but are not given any executive powers
what are the board styles
- country club- focuses more on personal relationships than task in hand
- professional board- a high regard for board relationships and a high regards for the tasks to be achieved
- Representative board- have a high regard for board relationships and a low regard for the achievement of board tasks
- Rubber stamp- Low regard for the board relationships and low regard for board relationships
types of directors
Executive directors- means a director who is involved in the managerial operations of the organisation.
Non-executive Directors- a director who is not involved in the managerial operations of the organizations
Who is an indepndent director
Not employed by the company in an executive capacity
Not associated to an advisor or consultant of the company
Not a company senior management or a significant customer or supplier
has no personal service contract with the company or a member of a company’s senior management
Not employed by a public listed entity at which an executive officer of the company serves as a director
Not a member of the immediate family of any person described above
procedure for the appointment of directors
shareholders have the ultimate responsibility of appointing directors
the shareholders should ensure that credible persons are elected
the board appointment process shall be documented clearly and approved by the board before they are used
The board should ensure that a balanced mix of diverse individuals who add value to the company are elected
All persons that submit themselves for election s board of directors should disclose any potential areas of conflicts that may hinder their service as directors
Board members should recieve formal letters of appoinment containing their terms and conditions t
What are the roles of the board
To communicate with shareholders on the performance of the company
decide on executive compensation
decide on dividends payments
Approving budgets
appointing CEOs
establishing firm policies
Hiring and firing top executive
Roles of the board
Identify corporate opportunities as well as risks
come up with appropriate staffing and remuneration policies
define the company’s mission and strategy
oversee corporate management and operations by reviewing the corporate performance
monitor the effectiveness of corprate governance practices
consider the intrest of shareholders in decision making
Implement a system of communication with the shareholders
what constitutes a balanced board
The board should constitute of executive directors, NEDs and independent directors
Independent and NEDs should constitute 1/3 of the board members
The board should disclose in its annual report whether the independent directors and NEDs satisfy the 1/3 and whether it satisfies the representation of the minority shareholders
The size of the board should not be too big to hinder effective discussions and neither should it be too small to miss on expertise
The board should monitor and manage conflicts of interests at management, board and shareholder levels
the structure of the board should represent the broad shareholding structure
Best practices relating to the position of chairman and ceo
Chairmanship of the board should be held by an independent and executive director
No person shall be chairman in more than 2 boards
Every listed company should have a succession plan
The CEO should implement the board corporate decision and a clear flow of information should exist
The CEO is obliged to provide necesary informatio to the board in the discharge of its duties
Best practices in relation to shareholders
The board should ensure equitable terms for the minority and foreign shareholders
All shareholders should recieve relevant information on the performance of the company through distribution of annual reports
Every shareholde should recieve a secure method of transfer or ownership and a statement or certificate issued to evidence the same
every shareholder has a right to participate and vote in the annual shareholders meeting
every shareholder has the right to ask questions and seek clarification on the performance of the company
every shareholder should be entitled to distributed profit in terms of dividend
companies as a matter of best practice are required to issue out investor briefings
every company should encourage the establishment and use of the companys website by shareholders
every company should encourage and facilitate the establishment of a shareholders association to facilitate dialogue between the shareholders and the company
shareholders while exercising their right of participation and voting are encouraged not to act in a disrespectful manner that may undermine the company’s interest.
Best practices in conducting an AGM
sufficient information on voting rules
opportunity to quiz management
opportunity to place items on the Agenda
Opportunity to vote in absentia
sufficient information for the to determine the cost and benefits of their votes
Attributes of Audit commitee
Objectivity- no conflict of interest
Broad business knowledge
familiarity with basic accounting principles
duties of audit commitee
OVersee the financial reporting process
consider the appointment of an external auditor, audit fees and any question pn the resignation or dismissal of the external auditor
Discuss with the external auditor the nature and scope of the audit before the audit commences and coordination of the audit where more than one firm is involved
review the financial statements of the company focusing on - changes in any accounting policy, Compliance with the relevant ISAs, significant adjustments , going concern assumption
Review communication between the external auditor and the group
duties of a company sec
Advise the chairman on legal rules affecting the company
Convening board, board committee and shareholder meetings
Advising on and guiding board and board commitee procedures
Advising the chairman on the agenda and writing minutes for the chairmans approval
maintaining the companys statutory records i.e the registration of directors
ensuring compliance with company legislation i.e corporate governance practices
Filing company law returns with the company registra
responsible for the changes in the companys memorandum and association
