Beruflich Dokumente
Kultur Dokumente
- in which we review:
- the appointment of directors -desirable attributes in a director -core competencies of a director -roles directors play -director s duties, rights and powers -directors' disclosures, service contracts and agreements -directors remuneration
directors of poorly performing companies entrenched wholesale change difficult pressures of market for control circumvented
case often made for additional directors seldom argued that a board is too large
lack of cohesion more difficult to reach consensus formation of cliques or cabals reduced opportunity for each director to contribute
offences against companies law failure to file official returns corrupt business behaviour
Behind the corporate constitutions, board structures and corporate governance codes are people
People bring personal prejudices, political behaviours and power plays to board affairs What personal attributes are needed in a successful and professional director?
- being able to recognise the nature and extent of interests in the company - being able to exercise independent judgement, doing what is right for the company despite personal or other interests
Intellect combines:
an appropriate level of intelligence the ability to think at different levels of abstraction the imagination to see situations from different perspectives, not along a single track
A company as a legal entity, has a legal persona, but it does not have a conscience.
The board has to act as the corporate conscience. 1. Obey the laws of all the jurisdictions in which it operates
2. Create a corporate character which establishes the way the company operates over and above merely staying within the law
3. Formal statement of the corporate mission and core values - can be little more than pious aspirations - can produce rigorous policies, approved and monitored by the board
1. selflessness - holders of public office should serve the public interest, not seek gains for their friends 2. integrity they should not place themselves under financial obligation to outsiders who might influence their duties 3 objectivity they should award public appointments and contracts on merit
4. accountability they should submit themselves to the appropriate scrutiny 5. openness they should give reasons for their decisions 6. honesty they should declare conflicts of interest 7. leadership they should support these principles by personal example
Every governing body is different Each director brings a different set of experience, skills and knowledge to the board Overall every board needs to have a mix of capabilities for a balanced and well qualified team So directors need some basic core competencies -experience,
skills, and knowledge - appropriate to the corporate entity. What might they be?
Providing independent and objective judgement Providing a catalyst for change, questioning existing assumptions, introducing new ideas Being a monitor of executive activities, offering objective criticism and comment on management performance Playing the role of watchdog, able to provide an independent voice and protect the interests of minorities Being a sounding board for the chairman, the chief executive or other directors Acting as a safety valve able to act in a crisis
Directors responsibilities derive from the nature of the joint stock limited liability company and are enshrined in statute law, case law and regulation Details vary by jurisdiction, but the essential duties are: a duty of trust - to exercise a fiduciary responsibility to the shareholders a duty of care - to exercise reasonable care, diligence and skill
Exercise powers in good faith, for the benefit of the members in the short and long term
Recognise the need to foster business, to see the impact of operations on communities and environment, and maintain a reputation for good business conduct
A director has a duty to exercise independence of judgement and not restrict his thinking or action
Act fairly
A directors duty is to act fairly between all the members of the company A director must recognise the interests of minority shareholders
Duty to act within powers Duty to promote the success of the company Duty to exercise independent judgement Duty to exercise reasonable care, skill, and diligence Duty to avoid conflicts of interest Duty not to accept benefits from third parties Duty to declare interest in proposed transaction or arrangement
Related party transactions provide good examples of the requirement to disclose personal interests
The listing rules of most stock exchanges and securities regulators require related party transactions to be disclosed and, often, approved by the other shareholders
The United States has the most severe penalties for insider dealing
Directors remuneration
The remuneration committee
Sub committee of main board Recommends remuneration packages of directors (and sometimes other senior management) Greenbury report (UK 1995) most CG codes require remuneration committee
Need to balance incentive to attract and retain top management in a competitive market for talent, rewarding success, whilst avoiding excesses and apparently rewarding failure
Directors remuneration
Reporting and voting on director remuneration SEC rules since 2007 require full disclosure of pay packages of top management US Corporate and Financial Institution Compensation Fairness Act (20090
response to perceived excessive rewards in financial institutions did not impose pay limits passed responsibility to shareholders