letter.
CG Code – Principle 1.1: The company should have a written appointment agreement with each director which recites the director’s powers and duties and other matters relating to his appointment including term, the time commitment envisaged, the committee assignment if any, his remuneration and expense reimbursement entitlement, and his access to independent professional advice when that is needed
In addition to above, it is recommended that each new director should read, understand and sign the following documents:
•Conflict of interest policy of the company
•Code of conduct for the Board members
A detailed explanation of what should be included in above two documents will be provided in subsequent chapters.
A sample appointment letter for board members is provided in Appendix ‘A’ of this guidebook.
1.6.2.4 Director’s Orientation/ Induction Training
As with any other key position in the company, it is very important to acquaint the new director with company processes, board rules and regulations and his detailed responsibilities. It is however noted that this process is not properly laid down in many companies. The CG Code has recommended that a formal orientation and induction training program should be adopted by the Board for each new director.
CG Code – Principle 1.1: When a new director is inducted, the chairman of the board, assisted by company legal counsel or compliance officer, should review the board’s role and duties with that person, particularly covering legal and regulatory requirements and this Code.
The above is also mandated by CBB vide CBB Rulebook: HC-4.5
The chairman of the board should ensure that each new director receives a formal and tailored induction to ensure his contribution to the board from the beginning of his term. The induction should include:
•Meetings with senior management
•Visits to company facilities
•Presentations regarding strategic plans
•Significant financial, accounting and risk management issues,
•Compliance programs
•Meetings with internal and independent auditors, and legal counsel
It is advisable that all continuing directors should be invited to attend orientation meetings and all directors should continually educate themselves as to the company’s business and corporate governance.
In addition to induction training, it is also recommended that periodic refresher courses or presentations should be arranged for directors so that the directors may keep themselves abreast with latest developments in the field of company’s business. This is also mandated by the CG Code.
CG Code – Principle 4.5: Management, in consultation with chairman of the board, should hold programs and presentations to directors respecting the company’s business and industry, which may include periodic attendance at conferences and management meetings. The Nomination Committee shall oversee directors’ corporate governance educational activities.
In order to help board members acquire, maintain and deepen their knowledge and skills and to fulfill their responsibilities, the board should ensure that board members have access to programs of tailored initial and ongoing education on relevant issues. The board should dedicate sufficient time, budget and other resources for this purpose. (Basel Committee on Banking Supervision: Principles for Enhancing Corporate Governance, 2010)
1.7 BOARD CHARTER/ TERMS OF REFERENCE
CG Code – Principle 1.1: The Board should adopt a formal board charter or other statement specifying matters which are reserved to it, which should include but need not be limited to the specific requirements and responsibilities of the directors.
1.7.1 Board Charter
The responsibilities and powers of the Board of Directors and individual Board Members must be documented in form of a formal Board Charter or Terms of Reference document. The charter should also include rules on number of board meetings, proxy rules, number of board members, tenure of membership, appointment and re-appointment procedures, and should refer to the code of conduct for the Board.
Every board is encouraged to have a board charter outlining the roles and responsibilities of directors. The following are some of the matters that should be considered when developing a board charter:
•A general outline of the board’s purpose;
•An overview of the board’s monitoring role;
•Structure and membership, including a requirement that one-third of members or 2 directors, whichever is higher, be independent non-executive directors;
•A formal schedule of matters reserved for the board, including authority levels;
•A position description of the role of the chairman, CEO and executive directors as well as NEDs;
•Appointment of board committees;
•Director’s orientation and education programs; and
•Agreed procedure on taking independent professional advice at the company’s expense in furtherance of the directors’ duties (whether as a board or in their individual capacity).
The charter should be periodically reviewed and updated in accordance with the needs of the company and any new regulations that may have an impact on the discharge of the board’s responsibilities.
A sample board charter is provided in Appendix ‘B’ of this guidebook.
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