Professional Documents
Culture Documents
Role of Board of Directors in Corporate Governance Financial Media Workshop Chile, January 2010
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Outline of Presentation
What is Corporate Governance? Building effective Board Governance The different roles related to the Board Some Concluding Thoughts!
Corporate governance is concerned with holding the balance between economic and social goals and between individual and communal goals The aim is to align as nearly as possible the interests of individuals, corporations and society.
Sir Adrian Cadbury Corporate Governance Overview, 1999 [World Bank Report]
Corporate Governance is a mechanism through which boards and directors are able to direct, monitor and supervise the conduct and operation of the corporation and its management in a manner that ensures appropriate levels of authority, accountability, stewardship, leadership, direction and control.
Board Operations
Strategy Corporate Policies & Procedures Board Governance Instruments Monitoring and Evaluation
Combined Assurance Model Internal Audit External Audit Other Assurance Providers Management
Source: KPMG
Function
Principal link between board and CEO/management team Responsible for board agenda and work plan Work with board committee chairmen Involved in selection and induction of new directors Counsel individual directors on their performance Participate in discussions with investors, key stakeholders
Function
Work closely with board chairman Responsible for performance of management team Formulate corporate strategy, annual business plan and budget Responsible for corporate and financial objectives Formulate major corporate policies Ensure continuous improvement in services and products Manage relations with investors, major customers, regulators Responsible for companys long-term sustainability
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Special business acumen or expertise not necessarily required Not necessarily liable for errors of judgment Given events following financial crisis, will this change?
The legal framework and company charters should not permit practices (such as pre-meetings and instructions on how to vote by shareholders whose votes placed a director on the board) wherein shareholders may limit the ability of directors to exercise their duties to act in the best interest of the company and all shareholders.
Paragraph 90, OECDs White Paper on Corporate Governance in Latin America
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Oversees, conducts induction trainings for newly elected directors Supervises and coordinates board papers & presentations
Ensures compliance with Takes the minutes of the board procedures board meetings
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Most significant risks facing the company Possible effects on shareowners Companys management of a crisis Importance of stakeholder confidence in the organization Communications with the investment community
Sufficient time is devoted to discuss risk strategy Appropriate levels of awareness exist throughout the company Risk-management processes work effectively A clear risk-management policy is published
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Ethical
Unfocused strategy Strategy not aligned with capabilities Complacency arising from past success Unsuccessful acquisition/abortive bid Failure to manage major changes Reputational risk Loss of investors confidence Political/general economic risk Management leadership weak Inadequate succession planning Loss of key executives Poor employee motivation Internal communication weaknesses
Failure to enact high standards of ethics Obtaining contracts unethically Stakeholder concerns on products/business probity poor community relations Over-dependence on suppliers/outsourcers Failure to manage cost/quality of outsourced service Supply chain problems Joint ventures, strategic alliances not working Cash flow/going concern problems Treasury operations risk Susceptibility to fraud/accounting irregularities Failure to protect intellectual property Health, safety, environmental issues Litigation risk Breach of competition, corporate, employee, tax laws
Suppliers/Outsourcers
People
Financial
Marketplace
Failure to respond to market trends Missed opportunities new tech., global markets Weak or obselete brands Over-reliance on a few customers Poor customer satisfaction quality/timeliness
Legal/Compliance
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MCIS GUIDING PRINCIPLES Build Trust and Credibility! Respect for the Individual Create a Culture of Openness and Honesty Set the Tone at the Top
Thank You!
Philip Armstrong
Global Corporate Governance Forum Telephone +1 202 458 9114
parmstrong@ifc.org www.gcgf.org
Uphold the Law! Avoid Conflicts of Interest Set Metrics and Report Results Accurately
Do the Right Thing! Promote Substance over Form Be Loyal to your Company, your Family, yourself
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