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    305 views102 pages

    Corporate Governance and Ethics Notes

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    Daniel

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    © All Rights Reserved
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    GOVERNANCE AND ETHICC _sahdago L_INTRODUCTION. ~ Definirhon of governance and ethicr. ~ Importonce of governance and ethior~ — Principley of.good governance. ~ Yper of governance. ~ Evoluhion of corporate governance. Meaning of Corporafe Governance’ : The Cigonisohen for Economic Co-operahon end Developmen COgco) detines Gorporate govecnonra) orthe procedure and Ploce.sres according 46 “whith an ~organinohon ic_divected end controlled: feet HL ic the fomework of whee, relahonshipv, Kurhemy ond procesew by which avthenty. ir exercived and controled in on exgumreerb'6n --=|lh encompasses the mechanivmy ky which comp:eniew ond -. these in sconbrol of them awe held to account. AL means i Carnying ov} the bycinesr according 4o thevtakeholdew? d + Jand ir theefere all about balancing indudducl.and voceta 1 Ee as well av economic goal i cn T]The 6G .shuclvre tha specter the dicsbubon 4 nghhe and tecponcibilihex ameng the. different parhciponty, id the organization and. ley down. the. ler ond procedurey Hy er decison malang - i “The Need for Corporate Governance _ =lln the secen$ past, q number of lage componier around the world, have collaped , mack of them a .a racult at lage vcale fioud by ther direclou- [These failures reduce publie confidence in- financial reporting land auditing Many people believe that company diteclont were. Coe accounting vlandardy and wlev and they were. a involied in create accounting wn geo were reloclont in dheir overight roler. Lomebinec nod _ keysteme to mibgate Copa’ renewing the companys thlemal comhole and axety to polential wasdager: In addihen s they would disregard the inlerecly o£ invecrdons Jag h excestive emuneratien ameng other ils Aca reutt,a need foshengthen the system ot coiperate | qovernance used by Companies was perceived which led to the edublishment of the Cabuiy Committee th the U-k Choited by Adnan Cad buy ‘ The Cadbury Report 7 This war the report tho+ wav produced bu the Cadbury Commitleo-H was t4led Fnencial Arpecke 0 Of Coporcte Govemonice- -lThe report wor published in (aq2 ia iA seb cut vecommendahon jon the arrangement of company boards ond. accountng qaemnance nicke, wovtager € Failures. There -recommendabony. h nuted to vaying. degree 4 2 eclablich other codecvuch ar theve of the. 60, Wold bankete. _ i AT, ] importance | Benefits of Cospatcle “Governance tilleade 4o impiaved_e inable wealth _ tereahon fet adds valve fo The company! opeahon dhiough @ move efficient stewardship, befler aset allacahon and impioved produchwily- a Reduced cart of capital - Good ¢ governance. lowers the ack percephon index among: investor all lowing dhem 40 provide finonts “Jad lower" codes of return- thgher fin voloction_ ond hare eae. AL increaver meals confidence, whith- lead: lo_pasitive influence in the vhowe pave land alo enhancer the, invertors _willingn ew to pay a caperate cuemance. Ididenal poi ov are Willing $o_ 4 oa } Ocosbur oman de i oo pay for shares in a well governed compeny - Reduced rick of copporote seandaly end cnicic -"1 conbibides -lo development of bedtler rick- management eystemv that aie able fo detect and give early waming signy- S| Beller developed financial sytem - owing +o incieared mailer confidence, thee ia betterchance to elhracd extemal finanse whih widenw accece 4o financial venicer leading to Lgowth ead. of fms. - see | Grteronse prosperity: and survival- t+ promoter sutainability of businesses, which lead 4o relention of existing: ond extablichment of new enterprses and coniequently.. gieadter economic growth - ‘ Ethioe, nbegnily and rerponsibility ~H reduces harerdovy prachtes wuch qv abue af power, conuphen » conflict of foteret among others that can ruin en aqganirertion ond. initea ¢ replacing them. with good prachcev- -| Emplayeo empowement- Ik encourages emplayee, parhcipartion Qand decision makings by cleadly specifying their rele in the \gavenance forces, whith decentaliter powex ond increare [ish vatirfachon. » : ‘ : | Adminishation of, justice ensure: proper applicahen of ruler requlaheny leading 4o bebber piolechin ot vdakeboldede right 6 os! SEE 124 Euteblichesa parilive-cowporole cultore- Principle of Goud Caporale Govemance Key elemenly-of good govemonce include: Henerky, bork ond integnty> troncparenty. responsibility, performance, cxerlation muteil rerpeok » accountabilidy ,-commitmend - etc. “JAIL Shere can be reduced. into 4 -brwad teneky of oe t ovenante, bebler Known a pillow ot goud Crprale gover @ Accountabilily - Gi Tanrp avency- (il) Recponnbility- @) Fairnesr- 1 _ [heatment of all wlabehaldenr or thy allows an entity 4g ee © Transporenc : Tronspaiency eter 40 the need to inform the ake holders about the company’ adhvihec, whot if plory to do m the fulure and any nck tyolved in ihe bownens vhelegie “Hl means opennes, willing nee by the company, 4o-predeca |provde clear informahon abeud fo chacheldenw ond: ofherv- Malesal matter concerning the ogenirahen performene and adhvitier vhould be dicclaced in ahimely and acevicde manner 4o reflect the. financial, veciol and enironmenda | porition of the organizatan- Gi)_Accountabilidy : . Corporate, accoumtabilily refer tothe abligahon and responeibilify to give on eplanchon or tearon fer the Companys achens-and conduct- 2 : : The board vhould pierent a balanced end undewtandable awerment of the companys pochion ond _prorpect: Gii)_Rerponsibility gules a Hu The BoD ave given authenty to act on bohalt of the company and *vhould therefore accept full. secpons} iliky. forthe power tgwen_4o them and fy outhorly exerciuev* ‘on In yo doing, responsibility requires thd they ure such authors leseorably ie es or ei it bet inleranke of thes 7 Company: . : - Oy Faieecr.1 Gquality Rolex to. equal Healment “There vhould ber fairness in the suivne the -prnneot imbereded partes. ONC] fie mee » F Gorpaote governonce - the cuclem of wher preaches ond. aver: b, whch o fim i ceecied on cent tlt ate ae Specific Pinciples of Corpoiale. Governance. | Griuing the boris efor on effective corporate goveinane famewoilk. The CG fomework should promote domparent ond efficient markelv, be consistent with thee sole of law and clecily arheulate the divsion of tecpanibilibex among different Ktupentory 1 regulatoy ond. enforcemend authorities - The righty of choeholden and keu Gwrewhip funchone The CG Ramework chould protect, facilitate the exeicire 04 shareholder ng hty - z witlable heolnend of vhaholden The GG framework should recagmne the ngbly of dekehalden, eFlabliched by lew ox though raubal erste. the fair -frecdmend of all whacholdens including minoaly and foreign vhacholdew: All vhareholdew whould have she. opportunity do, oblain elledwe sediew for viclaton of the night. The to tokehalden in corporate oveinai woe The CG framework cheuld recogni, the nghly ot Kttakeholdes evdabliched by law a through mulval agreement and encourage ackve co-operation between ccxporater and a 2 1 lakeholden In-deating wealth, goby and the surtainability of financially waund enterjoriver - fein 1 Dirclawre, and Transparen The 66 fomewoik «hovld ennne thed timely » aecviede diclowe ty made on all matenal mallew regarding the soperaben thcluding the financial vitvohon y awnewhip end Governance of the company - The. Recponsibilite: of the Board The CG Framework should encre the shelegio guidance of the (RO a ao the rae Jeompany and the boards accountability fo the company and chaieholden- a ae a ees i oi oe i per of Govenanre.) ~ 7 7 ~|Governonce tall of the procerrey of governing, whelher vaderiale [bya govenmend ; meuket or network and whether through the laws, norm; powel or language. oon orgonirabon. Wea theoretical concept refering to the achon, ¢ prose by which clable pwoter and cganieations anve ond _powicd The woud governance is denved from. the: latin word * Guberna re’ whith meene to tle ov steer. lnthélly » governonte exclunvely referred 40 the. nowmohve. fomework fer exeicive of power and Lnecephonice of accountabilily as Crees eesti lemocratic Governance |The range. of procesrev shrough. ‘which avtocieky, teochew conn and implemerly : regulations humen aghhy tau, [policies ‘end vocial hu: relohonchips ond. procestes between’ ond among tates makeivs , WORMATIVE— edlablishing » reledye + denvi igs teleding 4o or denving from @ vi «Met ecpectally off Behevioun ¢ 2" enderd.o environmental prolecwn. His charactenred by Hensparemy ond enperey in belh the public and pructe vector © -|Hir ascoaated with on open .parhelpatory gevemante proce”, which sterponds Jo -cthzen and: bunew. neede resothng Jo beller ond fairer government policiers Corporate Governance -|Relater 40 morale principlew ; valvev and “prachcer thet - [facilitate the balance between economic. cond eae! and behween individyal- and. common: goals : -| Crporale governance aims to: CG) Povde requlatony fomework and on auncornent conducive te - effechve economic achvihev- ~ |i) Garnentho} burinesces and cifirene ~ wight 9 oe. “opheld oxic | recponsibiliky and, environmental profecton: are considered. Cit) Promote adophon: oF oder of, ethic In, busnen 1m achieving the objechvev of erterpnier. — - Gx) Grane thof corporchony deer all thie lalablde in Fair and transparent manner soo: © Provide-forthe recpenibility of monn erica viva’ bonrpahen +4 Enviconme Governanre cet ee bie dive Fey Relews to all procecces“uilec, prachcec and_ioshhrh Shed — feonbibole. ss Ih plc sosgeae aed od exploitoton.af biadwenuly» ecar resownter and _ eo various modalities of. ween oalanbl elopmenj and “poverty eiadicahon. #: 5:| Beonomic ond Aion nciod Governone: his ie oll thoued of procesev; lex ond seer invtided 40 ‘aleguord invest mende-and : increare surbainabili ly of burinew enterprises i in idler do omaximize weallh end promote. buanes duedew. t _[eonkol rom. thet of direct ownership- vJachon have exiled wince. Sheisee of the co igroulh, They take the form of policiet Cmecro-economicé) the} lconbibule to vudeinable development and round: Anoncial Managemen +. prachees cr well ar procosces aimed oF accelerchng tegtonal integrchon to encounge hade ond inverbment between vialar :| G- Govermynce. A wholicies concept that definer and oweser the impect and relations between. goveroment ond vouedy or c whole, Meta - Govern unre to ay The methods ond ont of exerciving come corbol ever devolved oad decentralized decivion mokng ox aniverbony + If yefew to la theay of how governmenly «teer decenkelived. melee ky by indueclly scheping the wles ond norm’ of ‘Shove, networke : Bare Lica “way of enheneng co-ordineled goveinone ing agente poliheal wyvtem bared ona high degree of aw nomy for plualily of self .gaveining nelweiky aad inshdvhene> : eee » _) Fhat -T ond communicahon hey en government prochoer 7% Evoluhon of Cesporate Governanie i [The feundeken of corp erode, governanee con be toced to the picneeang. works of Berle and Meany (1932) who obsewed tha 1 ence modem Comporeheny have grwn 40 vey lage veer, they could eclablich o veporate. cyctem. of [Corporate governane t« not a. recent histerical. development ond while the concept fie be pierented. anew _ developme + Varouy mechanicmy ef fer. con: n= ng exeurbve _ | Re Coremert lobanchencl Ine Denvedwe Whgeten ~JOne ef the mero diivew of the. evoluhen of coxporole Lgaveinente over Sho centuievstemeine corporeder faikiew ond Reychenaic ericic, mort of which were ara rervit of corpuere, wrongs ‘ Name of thee wrongy include : -Q > Company manager losing ‘senre of businew (corporate ethics see ms OQ > Emphade of eorningss av the prime meane of & companys success »which:-led-4a the we of unethical prochcer Iike-creohie accductings Salvificofr of booke 45 ineveose or show higher -ecrmingy- ® > Bacesive divectore’ temonerehon- a wr Appioving improper finonvia| uted ementy by the boa, Olen condoning. untair capeete. deanone The worlds teachen-to there capovate WiorgY war marsive and led to the development of: lowy pl coder tov belber coperate Qovernance. Q:- THEORIES OF GOVERNANCE AND ETHICE = responsible for the develo ment af CG, iterator fede caelyaaepusle gastiene pence ~|Manager:..0f -ogonizohem aie typically nok odval sence. bul ove appointed - by ownew do’ ‘loc their benefid. 2 =| Querkonw then onterer. to-;how lc manages’ con 68 and thy gow tergiver nv ore oF vhucken and oe acure- Iho (ower iv vfoved do monimire chorweholdens wordh -- on The theonev. addiew the. cawe ondnef fect. of yercw vonta blev- euch av. éon &guiotien of, bead. member, - Ladd comm iHeey, independent directo. 5 rd fe-ob 43p menage, +4 ' =| Governance: sand: ethics +heones. a1 the theoretical fromewo monggement and social telohonchips- Corporte gavernonre theones: © Agency Theo - 2 Sewerdchip Theory 3 Stakeholder Theo. 4 Rerwurce Dependenre Theoy. S Legit macy Theoy- ai @ Chakeholder ! Shoeholder Theony t Politveart Theory: ‘i : & Trensachen Cou Theoyy. Ethior “Theores q. Deon tolegi cal Theory to Ubli brianna Theouy - | i Righty Theoy: - 2 Vide Theoyy. | AGewcy THEORY oY L “|The theory anser fem the dishnebon between the owner . Chéreholdes) oF the. compeny: eesignaled eo ther prineapeler _| and. the: executives, pied dow mongge: the Sganizabon called | ‘agente’ oe te Pace La see 7 Ae Smith sroggarled the. tnanagew-oF other peoples -mongy ‘Jaannck be expected 4o fond Shir hos implicationy. onthe role of the beard ond iby 7 ‘troche which in. dum? effec compeny. performance ye PO gal | | és S| WeaitMacy THeory = =| Legihmary ix a generaliced pecception or awumphor thet the achon ofan entily ore derivable, proper or appuprale with socially conbwed nam, Valuer and beliefs. ~|The theoy « baved on the nekon thot there is @ wocia{ ented between the wodely ond the omgenizerhon . Ac fume fecevev Permiscion to operate from the vociedy ond » is vlhmalely occountoble 4o the vociely fev hew + opeate and whol Ht does: i a -| The soaely provider the corporahon wilh the avthonty to own and ose natural terourcev and alco 40 hire emplayee w- The emph arts. of Shiv theo ‘v that the agenischon moe consder the right: of the public at lage ond not merely the night of the invarlore. -|Falue to comply with vocietal expeclehone mey reclt in vanehs one being impeced on the fimo : resbchons on the Fume, operahon» rerouccev and demond for ite prodocte STOKE HoLbER AHtaREHOLbER THEORY at ~[This theoy defer thet the vale ‘ecponability o+ baci increase. profits. The. corporation iv concidered av the property op haha lee.ond. they con dispore. of the property av they ike. ~The owner week a setun on their tovertment and that t& why they invest in a corporohion: The ‘menegemert ie. therefore legally and monallg obligated fo sene their intererhe The only way to achieve thir ie throygh confowmity 4o the banc lec of the vociety ond compliance wilh ethical and lega | Mtondard They should therefore exercise due diligence, care end avoid contlicl of imtorecke. ‘ > ‘ ODER DEE TE ROE EE Ethical Theodes ~~ In busines: henvachone, tb is expeoled Jha} corporahéne aot in lan ethical manner wher dealing with defend vhakehel den . Monggement decinvar ove mode to facilitate goal achievement of the omgonivohon and. ile vlakeholdew ar well- Ethics © @ bronch of philocophy-which of ihe one undeartor dond determine haw -human_achon ot os right. wrong: oc Nabh. re on ethice help monager to moke their day to day monagement deeuior on business ethioe ond 4 cenporote governance Monager chald enheipole whieh moral conceins shold be considered when moking their decisione-. The theoner provide pot of the decision making foundahon while ethior ove in. ploy» They seprevent the view pointe fom which indiiduole veok gudonce ar they moke decors. The 4 moin theonex arer © Deontolagy theory COvty Sared) @ Uhlitonanism theoney C Consequence haved) @ Righty. theovig ( Gabact bored) @ Vive. theory C Choiacer bored) - 1 I ¥ a os ae ( UTILITARIANISM | vDIVI/DUALLEM THEORY | PAlnaue | A theory thot tnsidy that an achon fe convidered 4y be night | or Wrong bored onthe conrequencey of the achon and. iy S effects on _majenty of the people. Tht meany hed an acon on. proche & etbicclly covect when it pioducey mae poribye Conrequeney In companucn to neg otve onev Fo there who ae involved. . Under these theorsev, the choite thot yield the greoterk i | benefily to the mel number of people & the one thet ie ethically coneck An achon ts conidered goad when H vesulhese ithe happiness of. the mojority of Shore affected by, thot vepecifiu_aclion: eR 8 A EEE TT the theowy propagaler thot theie chould be notnol inclination fouympathie with othew thivggh the monifertahon of a metal consciente thot prevent one fren deing hom do other: & DeowTooay | uM\veRVALICM THEORY Covty BAWED) . 5 4 i clase of Shearer thot «late thet people vhould adhere to the obligahions ond dutev when engaged mm decinon making, where ethios ave in play. The thecre cugger+ thed on acl mut be pecomed becowe in vame wey ttt cheraclerised by univervalily ie Copproprale for eveyone) ov thet it Conform with mera) lee Cformal wlev wed for gudging : the rightnee o wrengnes ot an act), | ~|Under the. they» marolily much follow avel of lev [ without on expectationy Thi mean that on individua | ir bond loblgcled 40 their dely 4o. fellow a-rol of moxime inorder 10 determine whether ther achore oe ethically nglt. 3 RIGHTS THEORY Coote BASED Theories thot wagyect thot the right ecabliehed by a eodely. oe. protected and given the highest previty. The Iheeay inne that humen nghb vhould be independent Q i fiom the Influence of obher factors ee I evey penn by vidue, of being homen. i —|Thee oie two type of human righ te: | @ Posthve_Homen Righty ~ Obligchonv put open Jo, people to provide goods ond servicer 40 other people. ® Negotve Humen Right. ~ Obligotion imposed on people towtop therm from interfeang with othe peopley teedom 4 VIRTUE THEORY (CHARACTER D) iA theory het emphesirer thet what moter tn ethical behewiour tv the integrity of cn individuals cheuaclen the theory Judger o pewan by hivlher cheracter rather than by an achon thet may denate fem his thee aerel behoviour- It checker the petrony Moral» taker repod aton ond mohvahen into occount when rating vnuwal ev immoral behoviow thot t considered unethical. Mou 2018 Qs ) : Discuss 5 osumphony of deontolagical theoy of ebhicv. \ Gsmke). Nov 20} G & (a) Oulline 3 weye on how the rerov1e dependency theoy could promote good governance. mk) » ‘Me: 2077 @ 3C) : Bee Exomine &@ cahesmy agoint-wlokeholder theay: Crk), EE Revemba 2016 2G5C0) lof. arganivoticnal legikme cy « GNermohve Cimk) =f the. comet of leghmecy. theory > explain the. following type Se ; r G) Pragenete Cieni2) @ Cognitive . Cimk) November 2018 Q@3G) : Gaplein the following theosev of good governances CO Stewerdrhip they (ama) G) Agency theory: @mb). Gi) Ahokeholder theory. Camby). May 2016 G30) : é : Outline @ propathone of reraace dependenie. they Corner). —+ Malay premise of, Ticncacton cat Theowy~ cary wil) awe then you qe+ Someone elwerdo somelhing | tev gour “Lensackon cost Th Ve enw Theor ney Shexy ook O ASO NEES Took ch th hee oh eden RG oo hig het ita i Cou - dh, jes OpporonnchES umae Sr onge. Honrachore ,coneder @ The coiporele goveinonce problem hens oods Cash theo fe shown eh ane "ont eeh ectice ownechip agp OF Vhostholdew rathe dhe effechve on feient acomplichmenh of | anmachons by Pine + rhs cramer i t i i y i i S BOARD GovEeRNANCE MODELS G) Nen-pra vernante mo — Advisy Board ~ Patron governcnce mede|. ~ Cooperative madel. ~ Menagement team model. > Policy board model. | ~ Fund raising beerd model- @) Corporale govemene modele ~Tradihona} model. ~ Cower board model - Cortex board model ~ Consensus board model ~ Competency booid model. Gi) Family ovoned bovinerves - a ®) Independent officer cad conitubonel commiusieny: INTRODUCTION ~| Governance ir the combinohon of policies, eyclemy and chucturey along witha chrategic and operational Fomework, with whieh the governigg body pubes ploce to ennie the leadewhip of the oigonication ; make: oppropnole deccanv ond: 4okew oppmpad te achony in on effechve ond accountable monner Opeohag A model of govemance replecent- on approach +9 the combinchon of the above element, H-refer to how thow policies scyclemy ,whuchmer and famewark interface wih each other and. whether Ihe cerponnbilty for them liex wilh the board axa whole ov with induidue | boord membere =|Operohing a burinesr tn todaye vacieky. tv tn ceoringly comple: _jand_ full of nicky The compleatty of the burinenw weld combine [with the cur unstable econemis climote » placer elevoled J [epacse serene: demend on becrds of diseclaw (ie demandv more time ond aHenkon fem Show verang a bocid member) th the nen-protel for prot weildy - Tor his vearen, beth need tovcdleck a booed gavemance mode f thet align their work with the gook of dhe ogoriaben- Thic meons, boaid govemonse madel- for non-profit ond for profit ogenizahony aie or differert os the ogenrabony thet belhicene: — 0 / | Non- pro fd cgonnabian ext to cee a homenttonan cr lenaronmentol need while for pioh4 companier am al [generating income for the compeny, itr empleycer on d te cherehol dew- iia Non-profit Goveinonce modele Non-profit boarder kee the organization mision a+ the fowefiont whea directing the atfaine of the eqganiahon: Incoming fonds ore ured to oppo the cigenvahiony work and mod tt boord member serve on the board becawe of their pasion end, commilment 4o the covte- While serving on such a board _ Carries @ cetlain ewe level o£ honour ond pioctigea, beard Imemben need $0 dake an achve approach +0. aveseeiny the egonisahion. fo. prevent piablemv end leqal iecuev- Von profit beardy hold recponsiblity for fodicioyy mo dtev, aw well w madfav that have bea delegated to odher. thew ae 'S common boord model fer nen-profid boards r 1. ADUIGRY BOARD @cvERNAUCE Mover A boatd velecled and domnoled by the executive director -Thiv board prondev pama facie leihmay.to the oqenteahon but govern only ine nominal con inceave She aqonisa hon cxedibility » fund Faking or public reletone effarde- [MB Boord member praide aduto anc, mey rubber lem p dhe execvhie. diectoge ‘ecommendatren v | = 12 PATRON GOVERNANCE MODEL | A model wimiler to the advirowy boord model - The mein difference between the two w thet the pamey pupae of the boerd i membew under the paton.model wy ty peilerm duhev | Jreloled 4o fund Yaksing. 4 ~[Pakon model boards are typically compromred of board mem bow _| whe hove peroneal wealth or influence within the held and ua . there primoy role b to othabute conhsbute thew own fords _| fe 40 the cigonizahon ond to we ther nefworkv toqern A ovkide conhibubone fer the oqeniserhen: | - 2 |Under the model, the bocid ‘membere cheve leer indlven se, ~~~ lover the CQ er cigenivebode boeid then mm the Advivowy Boad Model. ait wees | S:CO-GPER OUERNANCE MODEL |A. booid. thet operatey without o. C0-The bocid mokecv ~~. |eonrensval decicione ar a group of pee, making if the __-fmest democrats governonre model. Thee tr no _hieiacky ond ae. ane indiudual he Power Ov _jonolhe . The model tequiter thot. each member be eguclly _jcommitled to Ihe orgenvotion and willing 44a lee Hees |tecpena biliky tor the ackony of the whole board. 1 4: MANAGEMENT Team Monel The boord monagey operohony thioggh Anchona | commitleey That may or mey not hove a vlalt cos orcinade ~|Under the model, Jhere o1 few vhending committeey. & FUND RAWING BOARD MopéL ~ foundohgne There beads eve incorporated. veperately ond at varying degiesr of ‘armlength” om ther beneficloy chon ties. While they hove tespona\ bility for the governanee a+ the axyonizations their primey. foo iron raidag fundv to upport choritable couwey- i . They ae, operotonal in_ nature, allhough they may hove tadf Ly vppot.and coudinele their. achiev. Their goveinanie Jfonchon i focused, on velting diechony ond shedegies end providing. general ovewight ot vlodt achutiey, inancer ond allocations 1 Corporate Govetnanre_modele -TThere are S notable caporate goveronre, modele sm. faday businew. evtoblichmendu. While adopting an appropriade eveinance model » an ogorinationy need i in establichi {guiding jpdnaple- ond policies delegating serponsibiliba ond Javthorty to -mdividualy fer aaa Se ond policies, ‘ody h TAAD TONAL STRUCTURAL MODEL “JA model thol hav te foundahen upen the conera: thet the boed te the legel ownewhip enbly, ond m come wey even dhe bedy corporate ikelt-a (egal pewont view of the low. -lThe model guev legal terponsibility do ail collechve baad and and, do identify a path fv accourte Eettemmme deme onmemammomenemainerci: ithe board wpeake ox one voice: to all mathew The model identiioy ithevtuchnev but the boaid oulliner the pwcesvev av voted in the by-lows. 2 -fIhe Boatd gouriny and avemweev cor parokion-, evtablirhed clong Honchonal tines CAinance, homan rerources pragiomy ete) but delegeder the manggement fonchens 42 the managing, direcloce. thie the oldet model fer ecsporate gavenanse hene « bt aitdaled ky the dodayir ubandardr, bub it include o weful tempelate. thot continvey 40 be ered fey evlabliching arhclev of coopeah on. \ 2 “THe CARVER | PoucY BOARD GovERwANCE _ Medel : : a A model thal work for profit ond non-proht aganizativny. The. booid 0+ govenor thiough policiev thet ectablich egennrotione | a aidy government approacher ond management limitations. The execuhive duector hav. broad feedom to determine the mean that will be wed 40 achieve exgeninchena | aimy. Within _ defined limb the boed giver C60 the bulk of the responsibility for using Tho mean +0 gel do the end. ‘ 1 2 +ConTex | OUTCOMES BOARD GOVERNANCE Move a A model thet fotueeyon the volve thet the .cagonrohon brings to the. commonity- The, Booid defines the anderdy, epeclahony. and pedoimance ovtcomer according to. the aspiration of the eganizaton 0 thod the pimay duly. of the bord under thi model‘y clamfhed ond seling ovlcome to a echteve sucerr: To du thie, the bod mut drly veok Jo ondewtond the velve theie otgenizednon provider to the cormmunity- <[The model challenger the cid 40. iclienly > commumty Cm _lond.emplayee Knowledge ‘ \ we on their colome: } plese), legivlohan beck _prachvew 4%. comrencuc | PROCEIY BOARD GOvERINANLE MoDdEL A foun of Ihe cooperative medel wed in non-profit cagunized ony + H giver all boord member an equal vole, equel tesponabilly ond equal liability for decrton making end equal accountobiliky for dhe egentrahsn ( boed. KL cupperty conbibuhian fiom ofl board member ond expecty othew to liden, teqpect and conader thes colleague input. lt however Fecqgnirey that board membew heve diferent wi of expeide, Knowledge ond wide 46 bring to the able. (UB: The model ir valuable for the Non- profit busines , family owned busineccey ov well av widely hel d eorperahons with no meer vhere holders S COMPETENCY [ekieis |PRAGTICEY Boa, GOVERNANCE Model _ Thic ir a corporate beord thet ir imtererled in developing the Knowledge and vkilie of board members It. fovuwer on commonicetion, Hurt and felahanchipy. do improve overall] boaid joerfoimonce. : The model iy escentilly a developmentol ane, which veekw dy conknvally improve the. perfoimanie of the boord oucebmg ky diuing to. envure all membey f the boord heve She Raat aie bose aoe ia ‘The apptcach con ulvo preseibe behovowal expeoladons through the implementotion of board osseument leith e exteinol or velf-diven) and enue they. hove ‘a Common context of their woik Saget indent Offer ond Conch nal Commissiony “|The Commissicre ond independent officer of the Kenyon government cre cieated ‘ey Chople: s of the Contuhon oY Kenyo, Arbscle aye ov Ack of Porliament. _ | The objeck: of the comminsany ond independent odficers are: . @® Prolect xoverelgrity of the people: Gi) Cece the cbtewane ty all vtale agony af democretio valuw ond princspler- Gil) Promote convtstutronc lin . éy {The commisclony and the holderv of inde pendent} officer. @ ove vubject only 4e the contbuhen ond the low Gi) oe independent ond net subject do divection or conbol by. any pewen o cudhonity. THE COMMISSIONS : : = Kenyo Nehgnal Homan Righter Comminsson. - Mokonel bend Commiscon + _ 7 ~ Independent Gleckorol and Boundaney . Commision - ~ Porliamentacy Setuice Commivsion. ~ Tudi cial cereice Commicnon- ae ~ Commiccion on Revenue Allecohon.. ~Salane ond Remunerahén Commission - — Teachers Servite Commission. ~ Netonal Felice Service Commisncen- ~ Gthice ond Amb~ coruphén Commicdon- | = Notional . Gender ond Equality Commiwi on. | ~ Nohonal. Cohesion ond lobegraten Commiaten. | { INDEPENDENT OFFICES Chad (& D Office of the Auditor Genecal : Gelabliched under the consttohon to aud:t Government bediev and report on their management of allocated funds. G). Offize of tbe Conboller of Budget. Gelabliched onde Arhcle 22¢ of She Contruhen. with dba core mondate being to ovewee implementation of the | budget of the nohonel and coumy govemnmenty by avthonring withdiewal fom public indy - ~ OVERSIGHT ROLE : E Concemed with ovenreeing the implementohen at the \ budgelr of beth mchenel ond county governmendy. ; The conholler of budge-+ monilow the oie of Pobli fond in L A xyear ond teperly 4 porhoment on how thedindy hove ben vblned- ~_CONTROLLUNG ROLE Involve ovthorring withdrewaly From public fund. Before cwthoriving ony wihdrawelys the conholle ot bude 4 mut fick be woliched thee the vad withdiawal © avthenzed ky law. _(Dieedor by prolic PPS AT ON Rimmer teeteennet Ri] Board _me 8 +1 The Chairpesson, of the bord should be a non- execute S| Bead appontmenty, chould dake into considechon Compelencer, , &| Cxecutiw boord memberv cheuld menage-the- con lreh theck anre ws 4: BOARD OF DIRECTORS’? Sate. aslorlzcie A B00 6 body of eleclod a oppoinled m who Hetolly evruee, the. adihey of « compuny o exgennetion). Id mey aka be known av Bouid of Governance; Baad of Ageaty ov Board of Ture . . “|The Boaid fa bedy to who v delegated the.culy of managing the general affeins of & compony- A comporale body con only acl. through agerty and. tt 4 coure fhe doly of thove agenty to ok eet Ga yet menos ban ache of eporsib} te delegated $0 4 by Gn authendy- ae These'matlen. ove typically delailed in the agannabrene by lw te Arhcler of Asrocictron. The. ky (ow alte wpecfy the numbe of membew of She bord, hew they ave to be chooren ond. when they ore 40 meet. ‘ : i Ge aw og? i : : tae a si 7 ip] ~ Genero! Recommended Pracdrcex qe othe o: Bod of Directory Aro Soe Board: appointment vhould be: bared. on: recommen dofony of o6mincheny commidlee . ee, ip. oF the. ocgonizadron vhould-not be lew for. o.public: limited -eempeny ) limited companylegennotion coder co The board should be composed of the executive and non excutive members, the later being no lex Then thao Hirde Cle). directors divesstty and. mix of vkille + i Pehueen their roles ar manage and. :membew of the board. | -|The appointment of ‘each boerd member should -be in i wabing: “-rsageweneck ie ombrg + ~~ © | Gach beard meimbér ~thgll agnify the acteplence of dhe Fe | | oppotatnend i wo'ting. 4 The Bood may recommend 6 the chateholden the removal o. la board member. hazed on Ngn-"perfermon ce, a [Af mechage, unethical conduct ov a wef a Adveler ot Ascociotien, of the erganizohon ew any + Applicable low- pin ate ‘Appointment, Comporitien ond vine of-the Boor, : V\ | APpOMTMEuT ‘ apes eatty a Sa “TB utiy compony chovid hove a (foinal,morowe ae xy y PONY Faia gor & S -Plocedute) for the appointment of new diteclow 4o th Recommended . Practit Boar in: bs 1 {Tere vheuld be @ nominchon_commibfce which whould lead the Process foy booid appaintmenty: and make tecommendotie nv 80 the Bood. ; Ih ic advisable thot all director be ineued- wih lesbo» of a Sppaint meat indicating whet. they’ ore expecded’ and the : Herm ond conditions of appointment. . : ei the preceer 8 oppantment OF duectow schevld- be senathve fo S boaid repreentahun ond: avord Perception af: teptecen tab. Of narrow inteet, in lamr of regions gender , haicholding ete. recreate ave tes tm 4) The obligohen te take port tn duecter and Boor” evalvehon will be refened tom the leHer of appointme and the “accompanying fom of -veference: Acceptance by all_| . | 2ppeinteer will remove the ¢uvepirion etenly vome | 2 | diveclow. are bring evalucted. Cree LE (The: mix of membership chevld be opproianete ond i | eompebble with the need of the boord and. compeny. a GL Evey non execobue director should commel Cedegyaten dthme $e hie rempenvbrbes and. conbs bode effechuelg . Kk = All. ditectow chall be requnied fo vubmit themvelver. afer teelecten at sequlor siteriolv. ond of te eve Byeaw. Vahile o-thid of the Boad rehier hy Veledon of the AGM, chore holden have the nght to nominate condidater to contest for the position. Servite contvackrof renwe Bay duectors chal ‘net exceed thee yeou, but there ase tenewable with the ‘ 2 gt No_pesan vholl be a director: of mee then five lied < | Companies at ony one Hime, weith the exception.ot covporate Wvectow- ‘ : To enue effeckve porberpatien a the Beard Mere oe -|comperate directow hove, been cppainted, on -altemote _ director, ic appointed, and the appantment of wch altemnate diecter chall be rerbrcled 40.3 Disqualificotoa .of -Directows . >| TABUG A Arhele ¢ provider thet the office of director whell be vacated if the diector :- ,@ He hor ceared 40 be a director ky virwe of vec legie he har failed 4o take up prereribed vhoiws within two” menthe of hic oppointmenty ar. + = + underssec (¢6 which layy down dhe cminimum, ond maximum age of director. Hf2@ He became enka «5 @ He become of unvound mind: ets @ He iecign: by notre in vunttinga tothe canpong-” © He becames prahibited fiom being: a dnector me ony o®| ~ oder-under vec 104: (aechaining faudulent pecan fom managing a compeny ) G Ue absent -without -permssston. for- eagle monlhy fom meckinge of elicchent: held dang. thot pesod. oe Cther. pelenhal -cause: rok du valificotscn: >| Allowiag the compony ret while ta Caron | &audolent Hading)s.- : : >| Not Keeping. proper: accavr 4 | Fading: fo prepaie and vile accounly. + [Failing 40 vend tux teluiny and pay tax. “| Taking ochons thot ae deemed. to be orden he reenagemend lof a company: & COMPOSITION : ~| very compony shold be headed by en-effective boord which w collectively respondble for the longterm cuccen of the compony- The bsaid vhould be able to exeaze objectve inept aon on -corpoiate-affeine: The Baad ond jd commdleee hails, a an -apprewncte [CU were uncuio oF mroper sepiventation 1a the Baal ta fi take care of. diveve inde | balance of visll, mdependence. end knowledge of the ‘compas be able to dicho Ye their ter pective duher and respanal bi if se. |tecpectuely- ze | $3 » Recommended Prochce : i yO -| There thould bea clear division of rerponnibility of the fs | helm of the compony, between the wnning of tho Board AS and the execbve responaibility » fer the: wnoing et the of Company busines» —lThy te achieved ky chick execubie- ‘ Thee sthev The bead whould indude a be ante ot nén- ¢ |excwhie diector and exe ubsc, duectow: Thr o do S| teduce an orfavourable balan of Powew -bewerds * Lexecufuer. i : The Board cheuld cnet Of not lear then two thirde of non-executive directow excluding the chair- . @] One non- execuhie diector vheuld be the senior incepend | director who y duedly available to vhereholdew rf [they have concerne which cannot ov vhould- nck be dealt wih, thoxgh the appro pnele- channel ot, charman, CEO_ ev Financer duectov. way Proper teprecentoin of the Board’ : vores “| kills Mix-ond ‘Compedencer of birechors ’ : In selecting a dnector, the Following Faclexe ond bal oF candidates hold be conridered: vplting the wler of the-choir ond the 1-| Relevance of the. condidatex expenence ond. Knavledge to the enterprics ar-well ac monagenal and’ leadewhyp | experience. 2 Knowledge of thei ducky and counlnay here the. enterpnie. cenducky ty busnes Private ood « fully independend Tndependent non-executive. Director - A dueclay of @ @oD who doe not hove ony medenc | ov pecuniary. celedionvhia with company ov relaled pesony , except ithng teow q lead Independent Diector- Diiecor of the corpwahen; who i. repanable. for calling seporcde meebngy of the independent drecton, | delammniag. he agenda ond verung Ge chair im the. meehngy im Nominee Director~ A director oppointed to the Board, of cCompony 10 tepievent She intervts of hy eppointer on jae ce d Coppeinkco maybe & edad or thorshchdor ete). Shadow Director- Any other pexon, athe thon: a profemional aduver, wilh whare inshuehony the diecdor af the Company normally comply - Cexerbe influence over dhe componys ditectew Allemole Disector- A pewon who ts nomnaled by 4 dneclo, fo acl in_the absence. Can only be appointed with the agreement of mejonty of directore De- facto: Director -A pasonwho hoe no} been validly der who i dicqualified but who in .eHect occopiéy nat; and actly av it he wee, 4 director... dee ‘ renee : © po Lene gs dey Ht br NEOs ond, Independent Directors: eel ee In conhert wilh the Gxecuhve, Duedore,- WED: do no} arually hove a Full hme xe labonship. with: the ceampany: Ther, role i yo bong judgement. ond -experiene 40 the Bocrd that the execuhie directo might -laok. “| : They chall: be independent 0©f managements and tie fom | ony buns or other telchonhip which would inderfere wih the . exertice of the -ablidy 40 bing an independent judgement to bear on wae of cholegy » peformance, rerouvcey 1 Key appankmente_and vlandady of conduc. They shall. be. relied upon ion madden where there -i i 5 Kupplien,. divect ochomen or. other brad ! Smpetence. 4a goad Directo. | Make shine’ } Ipobenbial soy conflict 6f inherent asons for Néb:_ Indenendenc 1To prowde a delached and ob che view of. the | | Gecicrons. - [To provide expetise. {To commanicate : eHeohvely. ‘| To provide chee hddes wilh an inde pendent voice Board. : , T pronde confdenre jn_corporate Qovenence. ° {To offer a clear ‘monetary ale Monibonna + wo dumpen the excacive of exewhuer ie Ts enone in and wabchdag Perception. =.’ | To reduce. aceurotsens ot vel intent ta behaviow “ exechven - Bert Piachee in Relatron to. Webs i Ad Ine at Dire Be ay Ie Cempong muck conan of lark Guso- Third, Cab) i menbeu as MEDS - og Pesca with foi hm tmpleymeak.ia_eny company organrahen chould not own many ngn-execvhve dire elrewhere Cinds coftvelys nob moe than: two @) Peison without full chine _emplayment in one oGonng | C profesional dvrectons »conuttande ele). uhould not. he than. ten Cea) Non=execuhve directerwhipws ae Execohvew fiom subsdioner pthe: parent cempony or-0/ OF the ageridiony ccannol beconie NED of. the pe company. : ae Ig... lhe compPony».” cannot become” MEby of the Comper Pevtons with Boer profesianalcv coed reladver by, directors ef the company cannck become eR ERT eee wy lei tur UneuTON = ByEUr (nod exceed) 20, 2 deame of Q ysone ees Term for Non-Executive Board Membeas ~[Tem limiv fov WEDe ensure thet the Board remains dynamic. Tem lim therefore jronde an opportunity for chellenging the existing view pointy and creating new ones: . — Best Prachee _ |The denuie of @ non-execubve Boord member chavld nok exceed a comulatve tem of cx (c) fears, 2 tue ferme of three. gear each. 21 The renewal of @ Boaid members tenure. for a Secon chould be vukject 40.4 favourable evaluation: d teen @ BOARD CommiTtéEgs elalaoye: |The. Boald offen delegoter woik to commitlecs of director to mare. eflechvely deal_with tarwpla a-ceccalaed, wucuen sands: doe. ditectous mae effechvely - ~| Committees moke, eee Ye b acon to the ‘full boo which relains collechve repensibilify tev decinén making - | € Involvement in committer aia directow do degpen thei Knowledge. of the oggenraton, become mow achive ly engaged. and fuly..vtlne fhe expenence_ =| Addihenally, the: exitence of commiHees eon. indicede 40 invader thot the Boaid i-toking parkculer: ucuw secourly: Committees can deal -with specific, darks fer which the choord iv iecpenrible. buf which: ¢ doe: no} nececcarly have enwogh time lend. secure 40 manage By delegcting tarke 4o committees, [Boaids can spend their Ame more effechvely - Recommended Prachce [The Board vhould: @| Edablith en audet it committee and G maximum of Shire other commiflees Cky 1 wholever nome called), Jo diwhaye the following funchons: ® @ptne- ©

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