Corporate Governance: How To Add Value To Your Company: A Practical Implementation Guide

337 Pages·2006·1.1 MB·English

by  Alex Knell

Corporate Governance — How to
Add Value to Your Company
A Practical Implementation Guide
Alex Knell
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Contents
Preface xi
An Overview of the Book xiii
Acknowledgements xv
Section 1 Tell Me What I Need to Know about
Corporate Governance (CG)... 1
1 Enhancing Value 3
Objective 5
What exactly is Corporate Governance (CG)? 5
How to make things change 7
Layout 8
Results of compliance 8
2 No CG Recognition – The Company You Keep 11
Proving a negative 13
Recent history fuels anxiety 13
Solution – keeping businesses honest 17
3 Why No CG? 19
4 Basic Concepts 25
A code of ethics 27
Conflicts of interests in business 27
5 Applied Concepts 29
Independence 31
Responsibility 31
Accountability 32
Fairness 32
Reputation 32
6 Director’s Duties – A Reminder 33
Statutory duties 35
Fiduciary duties 35
Duties of skill and care 35
Other and emerging legal obligations 36
Executive and Non-Executive Directors (NEDs) 37
Company Secretary 37
7 Who are the Other Stakeholders? 39
Company workforce 41
Banks and lenders 41
Customers 41
Suppliers 41
Government 42
Local community 42
Other 42
Summary 42
8 The Key Areas Addressed by CG 43
Decision-making powers 45
Risk-taking 46
Directors’ remuneration 46
Financial reporting and auditing 47
s
nt
e Communications between directors and
nt
Co shareholders 49
●
9 The ACCEPTS™ Method 51
iv
What is the ACCEPTSTM Method? 53
Scoring Chart – ACCEPTSTM Method Instructions 53
Excel® spreadsheet 54
10 Basic Steps 55
Positioning principle 57
In plain English? 57
What needs to be done? 57
Checklists 58
Section 2 Detailed Implementation... 59
11 The Board 61
What is the principle? 63
Supporting principles 63
In plain English? 63
What needs to be done? 64
Components in this section 65
Summary checklists 67
Score Chart 68
Excel® spreadsheet 68
12 The Chairman and Chief Executive 71
What is the principle? 73
Supporting principle 73
In plain English? 73
What needs to be done? 73
Components in this section 74
Summary checklists 75
Score Chart 75
Excel® spreadsheet 75
13 Board Balance 77
What is the principle? 79
Supporting principles 79
In plain English? 79
What needs to be done? 80 C
o
n
Components in this section 81 te
n
Summary checklists 84 ts
Score Chart 84
●
Excel® spreadsheet 84 v
14 Board Appointments 87
What is the principle? 89
Supporting principles 89
In plain English? 89
What needs to be done? 89
Components in this section 90
Summary checklists 93
Score Chart 94
Excel® spreadsheet 94
15 Board Information 99
What is the principle? 101
Supporting principles 101
In plain English? 101
What needs to be done? 102
Components in this section 102
Summary checklists 104
Score Chart 104
Excel® spreadsheet 104
16 Board Performance Evaluation 107
What is the principle? 109
Supporting principles 109
In plain English? 109
What needs to be done? 109
Components in this section 109
Summary checklists 110
Score Chart 111
Excel® spreadsheet 111
17 Board Re-election 113
What is the principle? 115
Supporting principles 115
In plain English? 115
nts What needs to be done? 116
e
nt Components in this section 116
o
C Summary checklists 118
Score Chart 119
●
vi Excel® spreadsheet 119
18 Board – Rewards (a) Level and Make-Up 123
What is the principle? 125
Supporting principle 125
In plain English? 125
What needs to be done? 125
Components in this section 127
Summary checklists 129
Score Chart 131
Excel® spreadsheet 131
19 Board – Rewards (b) Procedure 135
What is the principle? 137
Supporting principles 137
In plain English? 137
What needs to be done? 138
Components in this section 139
Summary checklists 141
Score Chart 142
Excel® spreadsheet 142
20 Accountability (a) Financial Reporting 147
What is the principle? 149
Supporting principle 149
In plain English? 149
What needs to be done? 149
Components in this section 150
Summary checklists 151
Score Chart 152
Excel® spreadsheet 152
21 Accountability (b) Internal Control 155
What is the principle? 157
In plain English? 157
What needs to be done? 157
Components in this section 158
Summary checklists 159 Co
n
Score Chart 159 te
n
Excel® spreadsheet 159 ts
22 Accountability (c) Audit Committee ●
vii
and Auditors 161
What is the principle? 163
In plain English? 163
What needs to be done? 163
Components in this section 165
Summary checklists 169
Score Chart 171
Excel® spreadsheet 171
23 Relations with Shareholders – Dialogue 177
What is the principle? 179
Supporting principles 179
In plain English? 179
What needs to be done? 180
Components in this section 181
Summary checklists 182
Score Chart 182
Excel® spreadsheet 182
24 Relations with Shareholders – Constructive
Use of the AGM 185
What is the principle? 187
Supporting principles 187
In plain English? 187
What needs to be done? 187
Components in this section 188
Summary checklists 189
Score Chart 190
Excel® spreadsheet 190
25 How Did You Do? 193
Review where you are 195
What do my results mean? 195
A word of encouragement 195
Grand Score Chart 197
26 What to Do Now? 199
s Initial review 201
nt
e An essential requirement 201
nt
o
C Map of Code CG Requirements 202
Plan of attack – preparation 202
●
viii Plan of attack – the Board itself 203
Plan of attack – the Board Committees 204
Plan of attack – the shareholders 205
Plan of attack – the financial reporting and auditors 206
Appendix 1 Annual Report – CG Disclosures 209
Annual report section: Directors, officers and advisors 211
Annual report section: Corporate Governance 211
The Board 211
Board Committees 212
Appendix 2 Matters Reserved for the Board
ICSA Guidance Note 217
Appendix 3 The Role of the Chairman 231
Appendix 4 The Role of the Chief Executive 235
Appendix 5 Guidance on the Role of the
Non-Executive Director 239
Appendix 6 Sample Letter of Non-Executive
Director Appointment 243
Appointment 245
Time commitment 245
Role 245
Fees 246
Outside interests 246
Confidentiality 247
Induction 247
Review process 247
Insurance 247
Independent professional advice 248
Committees 248
C
Appendix 7 Chairman of the Nomination o
n
Committee – Job Description 249 ten
ts
●
Appendix 8 Chairman of the Remuneration ix
Committee – Job Description 253
Appendix 9 Chairman of the Audit Committee – Job
Description 257
Appendix 10 Performance Evaluation Guidance 261
Performance evaluation of the Board 264
Performance evaluation of the Non-Executive Director 265
Appendix 11 The Whistle-blowing Procedure 267
Appendix 12 Nomination Committee – Terms
of Reference 271
Appendix 13 Remuneration Committee – Terms
of Reference
ICSA Guidance Notes 283