CODE OF CORPORATE GOVERNANCE FOR PUBLICLY LISTED COMPANIES
THE BOARD’S GOVERNANCE RESPONSIBILITIES
Principle 2: The fiduciary roles, responsibilities and accountabilities of the Board as
provided under the law, the company’s articles and by-laws, and other legal
pronouncements and guidelines should be clearly made known to all directors
as well as to stockholders and other stakeholders.
Recommendation 2.10 The Board should oversee that an appropriate internal control system is
in place, including setting up a mechanism for monitoring and managing potential conflicts of
interest of Management, board members, and shareholders. The Board should also approve the
Internal Audit Charter.
Explanation. Includes overseeing the implementation of the key control functions such as:
Risk management- practice of identifying potential risks in advance, analyzing them and
taking precautionary steps to reduce/curb the risk.
Board members need to have a good understanding of risk management, even when
they lack expertise in that area. Boards may lean on the expertise of outside consultants to help
them review company risk management systems and analyze business specific risks. Boards
should perform a formal review of risk management systems, annually.
As part of the annual review, boards should review risk oversight policies and
procedures at the board and committee levels and assess risk on an ongoing basis. It’s helpful
to familiarize the board with expectations within the industry or regulatory bodies that the
organization operates in by arranging for a formal annual presentation on risk management
best practices. The annual risk management review should include communication from
management about lessons learned from past mistakes.
Compliance and internal audit- The Board establishes an Audit Committee to enhance
its oversight capability over the Company’s financial reporting, Internal control system,
internal and external audit processes, and compliance with applicable laws and
regulations.
Reviewing the corporation’s human resource policies- such as recruitment, employee
development and industrial relations, occupational health & safety, and hazards
management policy and etc.
Conflict of interest situations- A director of a company must avoid a situation in which
he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict,
with the interests of the company. This applies in particular to the exploitation of any
property, information or opportunity
Recommendation 2.11 The Board should oversee that a sound enterprise risk management
(ERM) framework is in place to effectively identify, monitor, assess and manage key business
risks. The risk management framework should guide the Board in identifying units/business
lines and enterprise-level risk exposures, as well as the effectiveness of risk management
strategies.
Explanation. Risk management policy is part and parcel of a corporation’s corporate strategy.
The Board is responsible for defining the company’s level of risk tolerance and providing
oversight over its risk management policies and procedures.
Both the law and practicality continue to support the proposition that the board cannot
and should not be involved in actual day-to-day risk management. Directors should instead,
through their risk oversight role, satisfy themselves that the risk management policies and
procedures designed and implemented by the company’s senior executives and risk managers
are consistent with the company’s strategy and risk appetite; and that these policies and
procedures are functioning as directed.
Recommendation 2.12 The Board should have a Board Charter that formalizes and clearly
states its roles, responsibilities and accountabilities in carrying out its fiduciary duties. The
Board Charter should serve as a guide to the directors in the performance of their functions and
should be publicly available and posted on the company’s website.
Explanation. The Board Charter guides the directors on how to discharge their functions. It
provides the standards for evaluating the performance of the Board. The Board Charter also
contains the roles and responsibilities.
Benefits of a board charter
The benefits of incorporating a board charter into your organisation’s governance
system are fairly self-evident, however serve a number of important functions and are worth
noting, including:
1. Documenting the policies that the board has decided upon to meet its governance,
leadership, social and compliance responsibilities;
2. Providing a useful induction tool for new directors and senior managers;
3. Creating a framework to review individual and collective performance and to clarify
roles and responsibilities of both the board and management.
And finally, the board charter is not a secret document; its communication to
stakeholders will have a positive effect and set the benchmark for performance, all of which has
to be good for the organisation.
