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Boards and Directors The Boards and Directors form the focal point of corporate governance with responsibilities extending to shareholders and other stakeholders. As a result, boards must have the appropriate balance of skills and experience within its ranks to fulfil its mandate., as the composition and performance of the board and its committees will be the key factors that will determine the success of the organisation. All companies should be headed by a unitary board comprised of majority of non-executive directors, and should be lead by a Chairman who is an Independent Non-Executive Director. Easy Guide to KingIII 2009 13 Some of the New Requirements 3. Has not been employed by the group or appointed as designated auditor or partner in the group’s external audit • The majority of non-executive directors should be firm, or senior legal adviser in the previous 3 financial years independent • Non-executive directors should not receive share options 4. Is not related (immediate family) to someone who has been • The chairman and non-executive directors should not receive employed by the group in an executive capacity in the incentive awards geared to the share price or corporate previous 3 financial years performance • The remuneration policy should be approved by shareholders 5. Is not a professional advisor to the group at the annual general meeting • The chairman of the board should be independent and free 6 Is free from any other business or relationship that could be in of conflicts of interest on appointment, failing which a Lead conflict , such as being a director of a material customer of or independent non-executive director should be appointed supplier to the company • Improvements have been made to the definitions of non-executive directors and independent directors as follows: 7. Does not receive remuneration contingent upon the company’s performance Non-Executive Directors The independent Non-Executive Directors should be independent in fact and perception of a reasonable informed These are defined as individuals not involved in the outsider. management of the company. If an independent Non-executive Director has served on the An individual in the full time employment of the holding board for more than nine years, the board should assess if company is also considered to be a Non-executive Director of his/her independence has been impaired. If not, a statement a subsidiary company unless the individual, by his conduct or that the independent director’s independence of character executive authority, is involved in the day to day management and judgement has not been affected or impaired should be of the subsidiary. included in the integrated report. Independent Non-Executive Executive Directors Directors Directors involved in the day-to-day management of the These are Non-Executive Directors who: company or being in full time salaried employment of the company (or its subsidiary) or both defines the director as 1. Are not representative of a major shareholder who can executive. control or significantly influence management or the board Executive Directors should carefully manage the conflict 2. Does not have a material direct or indirect interest in the between their management responsibilities and their fiduciary company or group which:- duties as directors in the best interest of the company. a. Is greater than 5% of the group’s total number of shares in issue There should be a minimum of 2 executive directors on board, b. Is less that 5% of the group’s total number of shares in the CEO and the director responsible for the finance function. issue, but is material to his /her personal wealth Easy Guide to KingIII 2009 14 The Board The Chairman The board should appoint a CEO who is separate from the The Chairman of the board should be an Independent Non- Chairman. Executive Director, failing which, a lead independent director can be appointed to handle matters of conflict for the The board should meet as often as required to fulfil their duties, Chairman. preferable at least 4 times per annum. The retired CEO should not become Chairman of the Board The board should ensure an effective risk based internal audit until 3 years have passed since the end of his/her tenure as an and the integrity of the integrated report. Executive Director. The board should ensure that there is transparent and effective Principle 2.16 lists 17 minimum core functions of the Chairman communication with stakeholders on both positive and of the Board negative aspects of the business. Chairmen of boards should apply their minds in an intellectually The board should report on the effectiveness of the company’s honest manner, and be satisfied that they have the ability and system of internal controls in the integrated report. capacity to discharge their duties. The board should appreciate that sustainability is not separate The chairman should meet with the CEO or CFO or the from strategy, risk and performance and should link long term company secretary or all three before a board meeting to sustainability to strategy to create business opportunities. discuss important issues and agree on the agenda. The remuneration of each individual director and the three The chairman can only chair the Nominations committee and most highly paid employees who are not directors of the should not be: company should be disclosed. 1. The Chairman of the Audit Committee. 2. The Chairman of the Remuneration committee. Board Committees 3.The Chairman of the Risk Committee. 4. A member of the Audit Committee. The board should appoint an audit, risk and remuneration and nominations committee. There should be a Succession Plan for the position of the Chairman. All board committees, other than risk committee, should comprise only board members and should have a majority of Overall, Chapter 2 of the King III report discusses the key non executive directors who are independent. governance responsibilities that directors are expected to apply which include the following: All board committees should be chaired by Non-Executive Directors, other than EXCO which is chaired by the CEO. • The role and function of the board and its committees (Principles 2.1 to 2.15). The performance of the board and its committees and • The composition of the board, the board appointment individual directors should be assessed annually and results process and director development (Principles 2.16 to 2.20). thereof disclosed in the integrated report, along with action • The company secretary, the performance assessments of plans to be implemented, if any. the board and its directors and the board committees (Principles 2.21 to 2.23). Easy Guide to KingIII 2009 15 • Group Boards and Remunerations of directors, senior Principle 2.10: executives, group boards and company secretaries The board should ensure that there is a risk based internal audit; (Principles 2.24 to 2.27). Principle 2.11: These are covered over 27 Principles which are stated below: The board should appreciate that stakeholders’ perceptions affect the company’s reputations; Role and Functions of the Board Principle 2.12: Principle 2.1: The board should ensure the integrity for the company’s The Board should act as the focal point for Corporate integrated report; Governance; Principle 2.13: Principle 2.2: The board should report on the effectiveness of the company’s The board should appreciate that strategy, risk, performance system of internal controls; and sustainability are Inseparable; Principle 2.14: Principle 2.3: The board and its directors should act in the best interest of the The board should provide effective leadership based on ethical company; foundation; Principle 2.15: Principle 2.4: The board should consider business rescue proceedings or The board should ensure that the company is and is seen to be other turnaround mechanisms as soon as the company is a responsible corporate citizen; financially distressed as defined in the Companies Act no. 71 of 2008; Principle 2.5: The board should ensure that the company’s ethics are Composition of the Board managed effectively; Principle 2.16: Principle 2.6: The board should elect a Chairman of the board who is an The board should ensure that the company has an effective and independent non-executive director. The Chief Executive independent audit committee; Officer (CEO) of the Company should not also fulfil the role of the Chairman of the Board; Principle 2.7: The board should be responsible for the governance of risk Principle 2.17: The Board should appoint a CEO and establish a framework for Principle 2.8: the delegation of authority; The board should be responsible for information technology governance; Principle 2.18: The board should comprise a balance of power, with a majority Principle 2.9: of non-executive directors. The majority of non-executive The board should ensure that the company complies with directors should be independent. applicable laws and considers adherence to non-binding rules, codes and standards; Easy Guide to KingIII 2009 16 Board Appointment Process Principle 2.26: Companies should disclose the remuneration of each individual Principle 2.19: director and certain senior executives; Directors should be appointed through a formal process; Principle 2.27: Director Development Shareholders should approve the company’s remuneration policy. Principle 2.20: The Induction of and ongoing training and development of The board and its committees must have clear terms of reference in directors should be conducted through a formal process; place which have to be reviewed annually to ensure that there are no gaps or overlaps. Company Secretary Regular performance evaluations of the board and its committees Principle 2.21: is essential not only to improve efficiency and effectiveness of the The board should be assisted by a competent, suitably qualified board, but also to develop individual directors and enable them to and experienced company secretary; add better value. Performance Assessment Principle 2.22: The evaluation of the board, its committees and the individual directors should be performed every year; Board Committees Principle 2.23: The board should delegate certain functions to well-structured committees but without abdicating its own responsibilities; Group Boards Principle 2.24: A governance framework should be agreed between the group and its subsidiary boards; Remuneration of Directors and Senior Executives Principle 2.25: Companies should remunerate directors and executives fairly responsibly; Easy Guide to KingIII 2009 17
"Boards and Directors"