Corporate Governance

Question 1

What are the characteristics of good corporate governance?

Answer 1

Transparency
Accountability
Responsibility
Fairness

Question 2

There are 9 chapters in the King Code of Governance, what a they?

Answer 2

1. Ethical leadership and corporate citizenship
2. Board and directors
3. Audit committees
4. Governance of risk
5. Governance of information technology
6. Compliance with laws, rules, codes and standards
7. Internal audit
8. Governing stakeholder relationship
9. Integrated reporting and disclosure

Question 3

What does chapter 1 ethical leadership and corporate citizenship state?

Answer 3

1. The board should provide effective leadership based on an ethical foundation
2. The board should ensure that the company is and is seen to be a responsible corporate citizen
3. The board should ensure that the company’s ethics are managed effectively

Question 4

How should the board provide effective leadership based in an ethical foundation?

Answer 4

1. Strategy should ensure long term sustainability of the company with due consideration for the impact in economy, environment and stakeholders of the company
2. Strategy based on four characteristics of good corporate governance
   
   • transparency
   • accountability
   • responsibility
   • fairness

Question 5

How should a board ensure that the company is and is seen to be a responsible corporate citizen?

Answer 5

Develop corporate citizenship policies and implement measurable programs

Question 6

How should the board ensure that the company’s ethics are managed effectively?

Answer 6

1. Ethical culture built
2. Determine ethical standards
3. Adhere to those standards
4. Company assess, monitors and reports and discloses its ethical performance

Question 7

What is stated in chapter 2 Board and directors in the King Code?

Answer 7

1. The board should act as the focal point for and custodian of corporate governance
2. Appreciate that strategy, risk, performance a d sustainability are inseparable
3. Provide effective leadership based on an ethical foundation
4. Ensure company is and is seen to be a responsible corporate citizen
5. Ensure the company’s ethics are managed effectively
6. Ensure that the company has an effective and independent audit committee
7. The board should be responsible for the governance of risk
8. Responsible for information technology governance
9. Ensure compliance with applicable laws and considers adherence to non binding rules, codes and standards
10. Ensure that there is an effective risk-based internal audit
11. Appreciate stakeholder’s perception affects the company’s reputation
12. Ensure integrity of the company’s integrated report
13. Report on the effectiveness of the systems of internal control
14. Act in the best interests of the company
15. Consider business rescue proceedings or other turnaround mechanism as soon as the company is financially distressed
16. Elect a chairman who is an independent, non executive director. CEO should not be the chairman of the board.
17. Appoint CEO and establish a framework for the delegation of authority.

Question 8

Discuss the board composition

Answer 8

1. The board should comprise a balance of power, with a majority of non executive directors and the majority of the non executive directors should be independent
2. With necessary skills and knowledge
3. Minimum of 2 executive directors, CEO and CFO
4. At least one third of the non executive directors rotates every year
5. Board recommends eligible directors to nomination committee
6. Perform reviews of independence and performance of any independent non exec director serving more than 9 years
7. Board have the right to remove directors without shareholders approval
8. Appointed through formal process
   
   • suitable
   • background checks
   • full disclosure
9. Induction and ongoing training through formal process
10. Assisted by competent, suitably qualified and experienced company secretary
    
    • not a director
    • appointed by board
    • assist nomination committee
    • provide guidance to board
    • ensure charters are kept up to date
    • prepare and circulate board papers
11. Annual evaluation of board, committees and individual directors

Question 9

What is stated in chapter 3 Audit committee of the code?

Answer 9

1. Board should ensure that the company has an effective and independent audit committee
2. Audit committee members should be suitably skilled and experienced independent non exec directors
3. The audit committee should, be chaired by an independent non exec director
4. Audit committee should oversee integrated reporting
5. Audit committee should ensure that a combined assurance model is applied to provide a coordinated approach to all assurance activities
6. Audit committee should satisfy itself of the expertise, resources and experience of the finance function
7. The audit committee should meet with external and internal auditors at least annually without management being present
8. The audit committee should consist of at least three members and all the members should be independent non exec directors
9. Chairman of the board cannot be chairman of the committee
10. Audit committee to perform annual review of the finance function and result published in integrated report
11. Responsible for overseeing of internal audit
12. Audit committee integral component of the risk management process
13. The audit committee responsible for recommending the appointment of external auditors and overseeing the external audit process
14. Audit committee should report to board and shareholders on how it has discharged its duties

Question 10

Discuss chapter 4 the governance of risk in the code

Answer 10

1. Board responsible for the governance of risk
   
   • policy and plan for system and process of risk management developed
   • reviewed annually
2. Board determine levels of risk tolerance
   
   • reviewed annually
3. Risk committee or audit committee should assist board in carrying out its risk responsibilities
   
   • risk committee should consists of min 3 members
   • meet twice per year
   • evaluated by board annually
4. Board should delegate to management the responsibility of design, implement and monitor the risk management plan
5. Board should ensure that risk assessments are performed on a continual basis

Question 11

What does chapter 5 of the code the governance of IT comprise of?

Answer 11

1. The board should be responsible for IT governance
2. IT should be aligned with the performance and sustainability objective of the company
3. The board should delegate to management the responsibility for the implementation of an IT governance framework
   
   • IT steering committee appointed with CIO (chief information officer)

Question 12

Discuss chapter 6 of the code, compliance with laws, rules, codes and standards

Answer 12

1. Board to ensure compliance
2. Board having working understanding of the effect of the laws, codes, etc on the company and its business
3. Compliance risk form an integral part of company’s risk management process
4. Delegate to management the implementation of an effective compliance framework

Question 13

Discuss the internal audit with reference to the code

Answer 13

1. Board to ensure there is effective risk-based internal audit
2. Internal audit should follow a risk-based approach to its plan
3. Internal audit independent from management
4. Internal provide written assessment of the effectiveness of the company’s system of internal controls and risk management
   
   • financial control to audit committee
   • system of internal control and risk management to Board
5. Audit committee responsible for overseeing internal audit
6. Internal audit strategically positioned to achieve its objective

Question 14

Discuss the governing of stakeholder relationship with reference with KING code

Answer 14

1. Stakeholder perception affects company reputation
2. Management proactively deal with stakeholder relationship
3. Balance between various stakeholders and best interest of the company
4. Equitable treatment of shareholders
5. Transparent and effective communication with stakeholders
6. Effective and efficient dispute resolution

Question 15

Discuss the integrated reporting and disclosure of the code

Answer 15

1. Ensure integrity of the integrated report
2. Sustainability reporting and disclosure should be integrated with the company’s financial reporting
3. Sustainability reporting and disclosure should be independently assured