Chapter 5 - Governance & Boardroom Practice Flashcards
What are the provisions of the UKCGC relating to nominations and appointments to the board?
UKCGC:
- there should be a formal procedure for board appointments
- appointment should be made on merit, against objective criteria
- there should be due regard for diversity, including gender
- the procedure should be transparent so shareholder can see what is happening.
According to the UK Code, what should be the composition of the nominations committee in a FTSE350, and who should be its chairman?
- the majority of members should be independent NEDs
- the chairman should be either the board chairman of an independent NED
- the board chairman should not chair where the committee is dealing with his succession
- EDs can sit on the committee, provided they are in a minority,
What were the three areas of improvement in corporate culture identified by the chairman of the FRC in 2016?
1) Connect purpose and strategy
2) Align values and incentives
3) Assess and measure
What are the responsibilities of the nomination committee, and where are these set out?
ICSA Guidance Note “ToR for the Nomination Committee (2013):
- regularly review board size and composition
- consider succession planning
- review leadership
- identify and nominate candidates for the board
- prepare job specifications
- review the results of board evaluation
- review time commitment for NEDs annually
What responsibility does the chairman of the nomination committee have regarding the UKGCG?
Ensuring that the relevant requirements of the Code regarding board composition are complied with.
What were the 4 key reports on board diversity?
2003 - Higgs Report
2003 - Tyson Report
2011 - Davies Report
What were the 4 key reports on board diversity?
2003 - Higgs Report 2003 - Tyson Report 2011 - Davies Report 2016 - Hampton Alexander Review 2016 - Parker Report
What were the findings of the Higgs report?
The majority of NEDs were white, middle-aged males with plc board experience.
What were the findings of the Tyson report?
Many useful sources of NEDs were overlooked, including:
- marzipan layer of executive management (which includes a large number of women)
- the private sector
- retired professionals, including accountants and lawyers
What were the recommendations of the 2011 Davies Report?
- there should be a greater proportion of women on boards
- FTSE100s should aim for a minimum 25% women on boards
- quoted companies should be required to disclose the number of women on boards
- companies should explain in the annual report how they address diversity
What were the findings of the Hampton-Alexander review?
The percentage of women on boards target should be increased to 33% on FTSE350s by 2020.
What were the findings of the Parker report?
Three recommendations:
- increase ethnic diversity of UK boards
- develop candidates and plan for succession
- enhance transparency and disclosure
How does the UK Code approach board diversity?
Supporting principle B.2.: the search for candidates should be conducted and appointments made with consideration for the benefits of diversity, including gender.
B.2.4 - the report of the nomination committee should contain a section on board diversity policy, including gender.
What issues should an individual consider before accepting an offer of an appointment as independent NED of a listed company?
- whether the compa,ny uses unethical business practices or has a bad reputation
- whether it is in serious financial difficulties.
- meet with key individuals within the company
How much time should NEDs be required to commit to the company, and should this be a contractual commitment?
Typical time commitments are 15-30 days per year, but this is not usually a contractual requirement.
