BOARD OF DIRECTORS – ROLES AND RESPONSIBILITIES
Role and responsibilities of the board:
provide entrepreneurial leadership of the company
represent company view and account to the public
decide on a formal schedule of matters to be reserved for board decision
determine the company's mission and purpose (strategic aims)
select and appoint the CEO, chairman and other board members
set the company's values and standards
ensure that the company's management is performing its job correctly
establish appropriate internal controls that enable risk to be assessed and managed
ensure that the necessary financial and human resources are in place for the company to meet its objectives
ensure that its obligations to its shareholders and other stakeholders are understood and met
meet regularly to discharge its duties effectively
assess its own performance and report it annually to shareholders
submit themselves for re-election at regular intervals All directors in FTSE 350 companies should be put forward for re-election every year.
An effective board demonstrates the following capabilities:
clear strategy aligned to capabilities
sharp focus on the views of the City and other key stakeholders
regular evaluation of board performance.
Legal Functions of Board of Directors:
Corporate Opportunity (Ahead of Personal).
A director is expected to act in good faith and prioritize the corporation's best interests, making decisions as a reasonable person would in similar circumstances.
Attention at meetings, Reliance on management and professional information and Delegation (to management to operate the business).
Decision Making – exercise reasonable business judgement
Some examples of mission statements:
Tầm nhìn của chúng tôi là phấn đấu trở thành một trong những công ty hàng đầu cung cấp dịch vụ mặt đất chất lượng tại các sân bay khu vực Châu Á.
Sứ mệnh của chúng tôi là cung cấp dịch vụ hàng không đạt tiêu chuẩn quốc tế, đáp ứng nhu cầu ngày càng tăng của khách hàng Chúng tôi cam kết thực hiện điều này thông qua hệ thống quản trị doanh nghiệp hiệu quả và việc sử dụng nguồn lực tiên tiến.
Uy tín là tiêu chí hàng đầu, thể hiện sự an toàn tối đa và chất lượng dịch vụ vượt trội Chúng tôi cam kết đảm bảo độ tin cậy trong mọi dịch vụ cung cấp, đồng thời không ngừng nâng cao uy tín và sự hài lòng của khách hàng.
VIAGS luôn cố gắng duy trì, cam kết với khách hàng, hãng hàng không.
Tận tâm là giá trị cốt lõi trong công việc, thể hiện đạo đức nghề nghiệp cao, giúp mọi thành viên trong tổ chức nhận thức rõ ràng về nhiệm vụ của mình, đồng thời thể hiện sự chu đáo và tận tình với khách hàng.
Tinh nhạy trong dịch vụ sân bay là sự kết hợp hoàn hảo của những điểm nổi bật và tinh túy trong chuỗi cung ứng Mỗi sân bay sẽ chọn lọc và kế thừa những yếu tố xuất sắc để đồng bộ hóa thành một chương trình chất lượng dịch vụ chung, nâng cao trải nghiệm của hành khách.
Nhân văn là yếu tố then chốt trong chiến lược phát triển, với con người là trung tâm Để hướng đến khách hàng, cần phải thấu hiểu và cam kết phục vụ họ một cách tốt nhất Đồng thời, nhân viên được xem là tài sản quý giá, cần được bồi dưỡng và phát triển, cũng như ghi nhận thành quả một cách công bằng và nhân văn.
BOARD MEETING AND BOARD STRUCTURE
A definition of board meeting
A Board Meeting is a formal gathering of an organization's board of directors, along with any invited guests, convened at regular intervals or as necessary These meetings are essential for reviewing organizational performance, discussing policy matters, addressing significant challenges, and conducting the legal business of the board, all under the leadership of the chairperson.
Board agenda items
A board agenda is likely to include the following topics:
The initial agenda item typically involves a review of the company's performance since the previous board meeting This includes an analysis of performance metrics to determine if they are trending positively and whether the established targets have been met.
Discussions regarding the company's performance should focus on concise summaries, allowing members to access comprehensive reports for review after the meeting Emphasize key pain points and highlights during the conversation, reserving detailed information for follow-up calls.
Evaluating past successes and challenges is essential for effective planning, as it allows organizations to devise future strategies for growth A significant portion of productive board meetings should focus on outlining these strategies and detailing their execution within the company.
Once the board of directors has established strategies, it is essential to discuss the key performance indicators (KPIs) associated with these strategies Developing actionable plans involves identifying specific metrics that will effectively measure the success of your strategies.
With implementing new roadmaps and strategies across an organization comes new obstacles and challenges Board meetings are a great time to discuss roadblocks and encourage ideas to work around them.
After addressing all key details, the board will discuss future action plans that impact the company's direction, with proposals being presented and voted on during the meeting.
In conclusion, the board meeting should satisfy these items:
- Agenda should strike a balance between short and long-term issues and every director should have the opportunity to place items on the agenda
- All the topic should have supportive information, including risk and alternatives identified and be distributed in the right time.
Time to set up the agenda
Board meetings are typically held quarterly or biannually, though they may occur more frequently based on the company's needs and directors' preferences These meetings serve to address current issues, assess the company's performance, and deliberate on the implementation of new policies.
Board meetings should be limited to two to three hours to respect the valuable time of board members It's essential to concentrate on strategic-level topics during these sessions, while smaller details can be addressed in follow-up meetings or syncs.
=> Meeting should be regular or at need and attendance expected.
Board structure
In the traditional two-tier board structure, a separate board of supervisory directors supervises the board of managing directors and gives advice to the managing directors.
In a one-tier board structure, the executive directors and non-executive, supervising, directors are all members of one and the same board They jointly form a single corporate body.
The one-tier board structure reflects neoliberal values by prioritizing investors and promoting a free-market economy, while the German two-tier model emphasizes stakeholder significance, codetermination, and managerialism.
Unitary board The two-tier board
There is a single board of directors, comprising executive and non-executive directors (NEDs).
The management (operating) board which is responsible for the day- today running of the business, consisting of executives only and led by the chief executive.
The supervisory (corporate) board with a wider membership, responsible for the strategic oversight of the organisation and led by the chairman
The decision-making process is expected to be less time consuming as decisions, which otherwise would require supervisory board approval, only have to pass one body.
In a two-tier board structure, the executive and supervisory boards convene separately, ensuring that discussions about business operations remain confidential between the respective boards This contrasts with a unitary board system, where all members participate in a single board meeting, allowing for open dialogue across all levels of governance.
The one-tier board system, rooted in the Anglo-Saxon model of corporate governance, is prevalent in countries like the United States, Canada, Australia, and the United Kingdom This model emphasizes capital markets as the primary mechanism for corporate oversight, where investors play a crucial role in monitoring management through buying and selling shares and voting at shareholder meetings Due to the high liquidity of the market, management is not subjected to stringent internal controls, resulting in a brief and formal relationship between managers and shareholders.
- The boards of most listed companies have between eight and twelve board members, and there are four structures of unitary:
there are all executive director board
the majority excecutive director board
the majority non-executive director board
the all non-excecutive director board
- Advantages and disadvantages of one-tier board:
An improved flow of information is achieved through the streamlined structure and smaller size of a one-tier board system Frequent board meetings and the inclusion of various committees, comprising a majority of experts among both executive and non-executive members, foster strong individual relationships and deepens the understanding of the business, thereby enhancing the board's supervisory effectiveness.
Faster decision making and reduced bureaucracy The structure of one-tier board enhancesfaster decision-makings because there is no separate
Employees supervisory board Thus, the need for separat eapproval of decisions does not arise.
Issues specific to the unitary board tend to relate to the role of NEDs.
- Main role of NED in unitary:
NED expertise: the implied involvement of NEDs in the running of the company rather than just supervising.
NED empowerment: they are as responsible as the executives and this is better demonstrated by their active involvement at an early stage.
Compromise: less extreme decisions developed prior to the need for supervisory approval.
Responsibility: a cabinet decision-making unit with wide viewpoints suggests better decisions.
Reduction of fraud, malpractice: this is due to wider involvement in the actual management of the company.
Improved investor confidence: through all of the above.
These are predominantly associated with France and Germany Using Germany as an example, there are two main reasons for their existence:
Codetermination: the right for workers to be informed and involved in decisions that affects them This is enshrined in the Codetermination Act (Germany) 1976.
In Germany, banks maintain a closer relationship with companies compared to the UK, often acting as shareholders Additionally, many shareholders deposit their shares and associated rights with their banks, strengthening this connection.
This creates a backdrop to creating structures where these parties are actively involved in company affairs, hence the two-tier structure.
Structure of two-tier board:
- Lower tier: management (operating) board
responsible for day-to-day running of the enterprise
the CEO co-ordinates activity.
- Upper tier: supervisory (corporate) board
Appoints, supervises and advises members of the management board
Strategic oversight of the organization
Includes employee representatives, environmental groups and other stakeholders' management representatives
The chairman co-ordinates the work
Members are elected by shareholders at the annual general meeting (AGM)
Receives information and reports from the management board.
Advantages of a two-tier board:
- Clear separation between those that manage the company and those that own it or must control it for the benefit of shareholders.
- Implicit shareholder involvement in most cases since these structures are used in countries where insider control is prevalent.
- Independence of thought, discussion and decision since board meetings and operation are separate.
- Direct power over management through the right to appoint members of the management board.
Problems with a two-tier board:
- Dilution of power through stakeholder involvement.
- Isolation of supervisory board through non-participation in management meetings.
- Agency problems between the two boards.
- Added bureaucracy and slower decision making.
- Reliant upon an effective relationship between chairman and CEO.
Comparison of One-tier (Unitary) and Two-tier Governance Board Systems
One significant distinction between structural board systems is their size; typically, one-tier boards are smaller in member count compared to two-tier boards.
- Board Meetings: There are more frequent meetings in a one-tier structure than a two-tier structure.
The one-tier board system prioritizes the rights and interests of shareholders, whereas the two-tier structure emphasizes the benefits for all stakeholders involved.
- Orientation: Two-tiered boards are representative in nature with network orientation, while one-tiered boards are independent and more market oriented.
Directors' emoluments vary significantly between governance systems in the USA and Germany In the USA, executive compensation is determined by the board with the assistance of remuneration consultants Conversely, in Germany, the supervisory board sets the compensation for the management board, adhering to statutory regulations.
Composition of the board
Executive directors: are directors who also have executive management responsibility in the company They are normally full-time employees of the company Eg: CEO, CFO.
Non-Executive directors (“NEDs”) :are directors who do not have any executive management responsibility in the company (They might be an executive director in a different company):
- NEDs are not employees of the company
- They are not full-time employees.
Independent directors: an independent director is an individual who:
- Has no link to a special interest group or stakeholder group
- Has no significant personal interest in the company such as a significant contractual relationship of the company.
BOARD COMMITTEES
Board committee structure
The nomination committee plays a crucial role in the board appointment process by evaluating the company's needs and recommending suitable candidates to the board, encompassing both executive and non-executive directors.
To identify candidates to fill vacancies on the board
Review regularly the structure, size and composition of the board and make recommendations to the board.
Consider the balance between executives and NEDs on the board of directors.
Ensure appropriate management of diversity to board composition.
Provide an appropriate balance of power to reduce domination in executive selection by the CEO/chairman.
Regularly evaluate the balance of skills, knowledge and experience of the board.
Give full consideration to succession planning for directors.
Be seen to operate independently for the benefit of shareholders.
The role of the remuneration committee is to have an appropriate reward policy that attracts retains and motivate directors to achieve the long-term interests of shareholders.
Members of remuneration committees must prioritize independence, transparency, and potential conflicts of interest when determining pay structures It is essential that remuneration policies are aligned with the long-term success of the company, though a one-size-fits-all solution does not exist for every organization.
The composition of the remuneration committee is crucial, ensuring that individuals do not participate in determining their own pay To maintain objectivity, the majority of the committee members should be independent directors, with executives being excluded from the decision-making process.
- The committee should agree with the main board a policy for remuneration
- Set detailed remuneration for all executive directors and the chairman, including pension rights and any compensation payments.
In organizations with performance-related pay schemes, it is essential for the committee to establish clear performance targets This ensures that executive directors and key management receive fair compensation for their individual contributions to the company's overall success.
- The committee should decide on pension arrangement
- Negotiate and agree the remuneration of each individual executive director
It is essential to assure shareholders that the compensation for executive directors and key management is determined by impartial individuals who have no personal stake in the committee's decisions.
The primary task of the audit committee is to oversee the relationship with external auditors to ensure the quality of the company’s financial statements.
Main responsobility of audit committee:
- Monitor the integrity of the company financial statement and any other formal statement relating to the company’s financial performance
- Review the company’s internal financial controls
- Review the company’s internal and risk management system (unless this responsibility is given to risk committee)
- Make recommendations to the board about the appointment, re- appointment or removal of audit firm
- Approve the remuneration and terms of engagement of the external auditors.
- Review and monitor effectiveness of the audit process.
Include internal controls and risk management.
Importance of committees
Board sub-committees are a generally accepted part of board operations.
Positives that come out of the creation and use of such structures are:
Reduces board workload and enables them to improve focus on other issues.
Creates structures that can use inherent expertise to improve decisions in key areas.
Communicates to shareholders that directors take these issues seriously.
Communicates to stakeholders the importance of remuneration and risk.
Satisfy requirements of the UK Corporate Governance Code (2010) (or other governance requirement.
NON – EXECUTIVE DIRECTORS (NEDS)
Roles of Non-Executive Director
Non-Executive Directors, often referred to as external, independent, or outside directors, play a crucial role in evaluating a company's direction and performance while providing an objective perspective on its management team Unlike executive directors who hold C-level positions, Non-Executive Directors are believed to better understand the company's interests without the influence of potential conflicts of interest that can arise between management and stakeholders.
Non-Executive Directors play a vital role in corporate governance by challenging and monitoring the CEO and senior management while providing an independent perspective on decision-making They hold senior management accountable and offer support and mentorship to enhance leadership effectiveness Acting as a "critical friend," Non-Executive Directors prioritize the interests of the company’s stakeholders, ensuring a balanced approach to governance.
Non-executive directors typically sit on the main board and have responsibility on the board sub-committees (e.g Audit Committee, Risk Committee, Nomination
- The role of the Non-Executive Director has the following key elements:
Non-executive directors (NEDs) bring a valuable external perspective to strategic direction, often possessing a clearer understanding of external factors influencing the company Their role in strategy formation involves offering creative insights and informed critiques, ensuring a thorough evaluation of the objectives and plans established by the chief executive and the executive team.
Monitoring Performance: Non-Executive Directors should scrutinise the performance of management in meeting agreed goals and objectives and monitor the reporting of performance
Risk: Non-Executive Directors should satisfy themselves on the integrity of financial information and that financial controls and systems of risk management are robust and defensible
Non-Executive Directors play a crucial role in setting fair remuneration for executive directors, overseeing their appointment and removal when necessary, and ensuring effective succession planning within the organization.
- In order to fulfil their roles, Non-Executive Directors need to:
Build a recognition by executives of their contribution in order to promote openness and trust
Be well-informed about the company and the external environment in which it operates
Have a strong command of issues relevant to the business
Insist on a comprehensive, formal and tailored induction, continually develop and refresh their knowledge and skills to ensure that their contribution to the board remains informed and relevant
Ensure that information is provided sufficiently in advance of meetings to enable thorough consideration of the issues facing the board
Insist that information is sufficient, accurate, clear and timely
Uphold the highest ethical standards of integrity and probity
Question intelligently, debate constructively, challenge rigorously and decide dispassionately
Promote the highest standards of corporate governance and seek compliance with the provisions of the Combined Code wherever possible.
Non-Executive Directors may be appointed to various board committees by the Board Upon their appointment, they will receive guidance on the committee's terms of reference and any specific responsibilities associated with their role.
Important: Non-executive directors are equally liable for the success or failure of a business, as outlined by statutory requirements and tax laws.
Independent NED
The Code emphasizes the importance of a balanced board composition, advocating for the inclusion of both Non-Executive Directors (NEDs) and executives to mitigate an imbalance of power favoring executives Specifically, it recommends that independent NEDs make up at least half of the board, not counting the chair.
A senior independent director (NED) should be accessible to shareholders for addressing concerns that cannot be resolved through the chairman, CEO, or finance director This role is crucial for ensuring effective communication and transparency within the organization.
To provide a detached and objective view of board decisions.
To provide expertise and communicate effectively
To provide shareholders with an independent voice on the board.
To provide confidence in corporate governance.
To reduce accusations of self-interest in the behaviour of executives.
A definition of independence is proposed for incorporation into the Combined Code.
A non-executive director is deemed independent when the board assesses that the director maintains independence in both character and judgment, free from any relationships or circumstances that could influence, or seem to influence, their decision-making These relationships or circumstances may include various personal or professional connections that could compromise the director's impartiality.
is a former employee of the company or group, until five years after employment (or any other material connection) have elapsed;
A material business relationship with the company, either directly or indirectly through a partner, shareholder, director, or senior employee of an organisation, is considered significant if it has existed within the past three years.
has received or receives extra remuneration from the company (apart from a
director’s fee), participates in the firm’s share option plan or performance- related pay scheme, or is a member of its pension scheme;
has close family links with any of the company’s advisers, directors or senior employees;
holds cross-directorships or has significant links with other directors through involvement in other companies or bodies;
represents a shareholder with a significant stake;
has served on the board for more than 10 years.
A cross directorship occurs when two or more directors serve on each other's boards, typically involving non-executive roles for the secondary appointments.
Director A serves as an executive director on the board of company X while also holding a non-executive role on the board of company Z Similarly, Director B is an executive member of company Z's board and occupies a non-executive position at company X.
Cross directorships can compromise the independence of non-executive directors (NEDs) due to potential conflicts of interest When one director evaluates the performance of a colleague who also influences their own assessment, impartiality is lost This situation creates a risk that both directors may prioritize personal interests over the best interests of the shareholders they are meant to serve.
In practice, such arrangements may also involve some element of cross shareholdings which further compromises the independence of the directors involved.
It is for this reason the cross directorships and cross shareholding arrangements are explicitly forbidden by many corporate governance codes of best practice.
Disadvantages and advantages of NED in Board of Directors
Monitoring: they offer a clear monitoring role, particularly on remuneration committees to dampen the excesses of executives.
Expertise: to expand this resource available for management to use.
Perception: institutional and watchdog perception is enhanced because of their presence.
Communication: the implied improvement in communication between shareholders' interests and the company.
Discipline: NEDs may have a positive influence on the success or otherwise of takeovers.
Unity: lack of trust and needless input can affect board operations.
Quality: there may be a poor gene pool of NEDs willing to serve.
The proposed removal of stock options from compensation packages, combined with equal legal liability for company operations, may cause potential candidates to reconsider their interest in the position due to inadequate remuneration.
CEO AND CHAIRMAN
Responsibilities
It is vital for good corporate governance to separate the roles of CEO and chairman.
The division of responsibilities between the chairman and CEO should be clearly established, set out in writing and agreed by the board.
The significance of appointing a CEO and chairman is emphasized by the CEO's predominant role in selecting executive directors for the board, while the chairman exerts considerable influence over the appointment of non-executive directors (NEDs).
The overall responsibility of the chairman is to:
- Ensure that the board sets and implements the company's direction and strategy effectively, and
- Act as the company's lead representative, explaining aims and policies to the shareholders.
Specific responsibilities of the chairman: The specific responsibilities of the chairman, inter alia, are to:
- Provide leadership to the board, supplying vision and imagination, working closely with the CEO.
- Take a leading role in determining the composition and structure of the board which will involve regular assessment of the:
Balance between executive directors and NEDs
Interaction, harmony and effectiveness of the directors
- Set the board's agenda and plan board meetings
- Chair all board meetings, directing debate toward consensus
- Ensure the board receives appropriate, accurate, timely and clear information facilitate effective contribution from NEDs
- Hold meetings with the NEDs, without the executive directors present
- Chair the AGM and other shareholders' meetings, using these to provide effective dialogue with shareholders
- Discuss governance and major strategy with the major shareholders
- Ensure that the views of shareholders are communicated to the board as a whole.
The overall responsibility of the CEO is to:
Take responsibility for the performance of the company, as determined by the board's strategy
Report to the chairman and/or board of directors.
Specific responsibilities of the CEO:
The specific responsibilities of the CEO, inter alia, are to:
Develop and implement policies to execute the strategy established by the board
Assume full accountability to the board for all aspects of company operations, controls and performance
Manage financial and physical resources
Build and maintain an effective management team
Put adequate operational, financial, planning, risk and internal control systems in place
Closely monitor operations and financial results in accordance with plans and budgets
Interface between board and employees
Assist in selection and evaluation of board members
Represent the company to major suppliers, customers, professional associations, etc.
Comparisation between CEO and Chairman ‘s Roles
Executive Director Full-time employee Part-time Usually independent
All executive manager report, directly or indirectly, to the CEO.
The CEO report to the chairman
(as leader of the board generally).
No executive responsibilities. Only the company secretary and the CEO report to the chairman directly or matters relating to the board.
The chairman reports to the company shareholders, as leader of the board.
Head the executive management team.
To draft proposed plans, budgets and strategies for board approval.
To implement decision of the
Leader of the board, with responsibility for its effectiveness.
To make sure that the board fulfills its role successfully.
To ensure that all directors contribute to work of the board. board.
The UK Corporate Governance Code (2010) emphasizes the necessity of a distinct separation between the roles of chairman and CEO, stating that there must be a clear division of responsibilities at the top of the company to prevent any individual from having unrestricted decision-making authority.
- Chairman should be independent in the same way that NEDs are designated as being independent If not, reasons must be clearly disclosed to major shareholders.
- The code states the Chairman should, on appointment, meet the independence criteria set out in the provisions, but thereafter the test of independence is not appropriate to the Chairman.
Reasons for splitting the role:
- Representation: the chairman is clearly and solely a representative of shareholders with no conflict of interest having a role as a manager within the firm.
- Accountability: the existence of the separate chairman role provides a clear path of accountability for the CEO and the management team.
- Temptation: the removal of the joint role reduces the temptation to act more in self-interest rather than purely in the interest of shareholders.
- The chairman is responsible for leading the board and the CEO is responsible for leading the executive management Combining the two roles creates a position of dominant power;
- They are two different roles, requiring different sets of skills The same individual may not have the set of skills required to perform each role well;
A dominant individual on the board can disrupt the necessary balance, potentially hindering the effective contributions of Non-Executive Directors (NEDs).
- In some cases, there may be a risk of the chairman/CEO being a domineering personality, who disregards the views and opinions of board colleagues.
The UK Combined Code advises against a company’s CEO transitioning to the role of chairman, even after resigning as CEO, to ensure effective governance and accountability.
The UK Combined Code stipulates that the chairman must be independent upon appointment, which is not achievable if the individual has previously served as the CEO, whether current or former.
- Unity: the separation of the role creates two leaders rather than the unity provided by a single leader.
- Ability: both roles require an intricate knowledge of the company It is far easier to have a single leader with this ability rather than search for two such individuals.
- Human nature: there will almost inevitably be conflict between two high- powered executive offices.
4 Let talk about the BrightCo case to understand more about CEO and Chairman
After a successful 30-year career at BrightCo, the outgoing CEO and chairman retired three years ago, having held the combined role for over a decade Fortunately, succession was seamless, as Dan Bolowski, who had been serving as second in command for several years, confidently stepped into the leadership position.
Investors experienced a thrilling journey as minor declines in share prices were quickly overshadowed by significant gains Bolowski's bold "slash and burn" acquisition strategy expanded the company threefold, enabling it to penetrate new global markets By purchasing, streamlining, and reselling large corporations, he successfully generated substantial profits.
The board of directors, composed of seven company executives and three experts appointed by the former CEO, expresses satisfaction with the CEO's performance, attributing part of this success to their influence However, none of the board members maintain regular communication with shareholders, and their meetings are infrequent, primarily focused on reviewing current performance This lack of oversight allows Mr Bolowski significant autonomy, which is perceived as a key factor in the company's favorable trading position.
Shareholders are generally satisfied with the company's performance; however, some institutional investors have raised concerns regarding the sustainability of BrightCo's current strategy They question whether the company has the financial resources to support this approach and whether its exposure to unknown markets poses significant risks, potentially making it vulnerable.
During the recent board meeting, Mr Bolowski confidently dismissed any criticism and asserted his commitment to elevating the firm to new heights, a statement that was met with enthusiastic applause from attendees.
(a)With reference to the scenario, discuss changes to governance structure that you would recommend for this company.
(b)Assuming the changes recommended in part (a) are carried out, describe the possible role of a new board of directors.
BrightCo's governance structure will evolve in response to shortcomings in its current operations Despite the company's impressive success, there are no guarantees for its future performance It is crucial to address the concerns of institutional investors, as they play a significant role in the firm's overall shareholding Ultimately, the company must align its objectives with the expectations of these investors to ensure sustained financial success.
The governance scenario highlights a significant concern regarding the absence of separation between the roles of CEO and Chairman This issue is contentious, particularly as the UK's Combined Code clearly recommends that these positions should be held by different individuals to ensure effective governance.
The Chairman is responsible for representing shareholders, while the CEO is tasked with managing the company Currently, it seems that the CEO/Chairman prioritizes company operations over addressing the wishes, needs, and concerns of shareholders.
The Code advocates for an independent Chairman who has no previous ties to the company, promoting unbiased decision-making free from executive management influence Appointing an "insider" to this role may lead to conflicts of interest, particularly if their strategies elevate shareholder risk beyond acceptable limits.
The critical issue at hand is the insufficient representation of non-executive directors (NEDs) on corporate boards, which undermines their ability to provide valuable expertise and serve as effective monitors for shareholders According to the Combined Code, UK companies should maintain a balanced ratio of non-executive to executive directors of at least 50/50, with the Chairman holding a casting vote to prioritize shareholder interests in case of conflicts However, the current number of NEDs falls short of meeting this essential requirement.
Current non-executive directors lack regular interaction with shareholders To address this, Provision A3 of the Combined Code recommends establishing a senior independent role to facilitate shareholder communication when needed Acknowledging this role could enhance governance restructuring, although increasing the number of non-executive directors is an essential initial step.
Continuing Professional Development – CPD
Continuing Professional Development (CPD) refers to the intentional learning activities that professionals undertake to improve and enhance their skills This proactive approach to learning encourages individuals to take charge of their professional growth, transforming the process from passive absorption of information to active engagement in skill development.
CPD integrates various learning methodologies, including training workshops, conferences, e-learning programs, and best practice sharing, all aimed at enhancing individual professional development With over 1,000 institutes and professional bodies in the UK, this number is expected to grow, reflecting the increasing emphasis on effective continuous professional development.
The increasing emphasis on vocational and skills-based education highlights the necessity for academic qualifications to incorporate practical learning A systematic and hands-on approach to education enables employers in various industries to retain essential personnel while enhancing the skills and knowledge within their organizations, ultimately ensuring a sustainable competitive edge.
Continuing Professional Development (CPD) is essential for keeping academic and practical qualifications current, enabling individuals to consistently upskill or reskill throughout their careers, regardless of their occupation, age, or educational background.
The importance of continuing professional development:
CPD ensures your capabilities keep pace with the current standards of others in the same field.
CPD ensures that you maintain and enhance the knowledge and skills you need to deliver a professional service to your customers, clients and the community.
Continuing Professional Development (CPD) keeps your knowledge current and relevant, helping you stay informed about evolving trends in your field In today's rapidly changing environment, it is crucial to adapt and update your skills; otherwise, you risk falling behind as your expertise becomes outdated.
Continuing Professional Development (CPD) enables you to enhance your effectiveness in the workplace, making a significant contribution to your team By engaging in CPD, you can advance your career and open doors to new roles where you can lead, manage, influence, coach, and mentor others.
Continuing Professional Development (CPD) keeps you engaged and enhances your appeal by introducing fresh perspectives While experience is invaluable, it often leads to repetitive practices By participating in targeted CPD, you can explore new opportunities, acquire updated knowledge, and develop diverse skill sets.
CPD can deliver a deeper understanding of what it means to be a professional, along with a greater appreciation of the implications and impacts of your work.
CPD helps advance the body of knowledge and technology within your profession.
CPD can lead to increased public confidence in individual professionals and their profession as a whole.
Continuing Professional Development (CPD) plays a crucial role in enhancing protection, quality of life, and sustainability across various professions, especially in high-risk and specialized fields By focusing on these areas, CPD ensures better environmental practices and contributes positively to property and economic stability, making it essential for effective oversight that may be challenging to implement on an individual basis.
DIRECTORS – PERFORMANCE EVALUATION
Directors’ remuneration
Directors' remuneration refers to the compensation provided to company directors, which can include fees, salaries, or access to company assets, and requires approval from both shareholders and the board of directors.
The process of directors' remuneration came about because of shareholder concerns that directors were rewarding themselves large salaries despite showing poor profits or revenue.
The Greenbury Report (1995) addressed shareholder concerns regarding directors' remuneration by proposing a framework to balance salary and performance This initiative aimed to enhance transparency and restore shareholder confidence in corporate governance.
The remuneration committee is essential in establishing a reward policy that effectively attracts, retains, and motivates directors, ensuring alignment with the long-term interests of shareholders.
The committee is, and is seen to be, independent with access to its own external advice or consultants.
It has a clear policy on remuneration that is well understood and has the support of shareholders.
Performance packages produced are aligned with long-term shareholder interests and have challenging targets.
Reporting is clear, concise and gives the reader of the annual report a bird's-eye view of policy payments and the rationale behind them.
The overall responsibilities of the remuneration committee are to:
Establish and consistently assess the framework and overarching policy regarding the compensation and employment terms for the board chairman and executive directors, including the design of performance targets and any associated bonus payment schemes.
Recommend and monitor the level and structure of the remuneration of senior managers.
Establish pension provision policy for all board members.
Set detailed remuneration for all executive directors and the chairman, including pension rights and any compensation payments.
Ensure that the executive directors and key management are fairly rewarded for their individual contribution to the overall performance of the company.
To assure shareholders, it is crucial that the compensation of executive directors and key management is determined by impartial individuals who have no personal stakes in the committee's decisions.
Agree any compensation for loss of office of any executive director.
Ensure that provisions regarding disclosure of remuneration, including pensions, as set out in the Directors' Remuneration Report Regulations 2002 and the Code, are fulfilled.