A.   GOVERNING BODY EFFECTIVENESS

A-1 Principle

The corporate governance framework for effective governance requires that the organization is headed by a governing body accountable to the organization and its owners with oversight responsibility for management and for the organization’s sustainability and enduring value creation. An organization should therefore be led by a governing body that is adequately constituted, trained and supported to allow for maximum effectiveness.

A-2 Rationale

An effective and ethical governing body is critical to the long term success of any organization. An effective governing body develops a strategy and business model to ensure that the organization achieves its purpose and generates long-term sustainable value for owners, having regard to the interests of stakeholders. The governing body is responsible for ensuring that its strategy is clearly articulated, communicated and implemented throughout the organization, and that it supports appropriate behaviours and practices that are aligned with the organization’s values. If an organization is not well led, the effects of poor leadership will permeate and ultimately lead to its demise and failure to fulfil its purpose. Governing bodies that are held accountable for their actions will ensure that they perform at the highest standards expected of them and that any powers of delegation to management are exercised with reasonable care and skill.

A-3 Key Aspects of Practice

A-3(a) General

The governing body should ensure, through its head and its members, that:-

1. policies are prepared, implemented and reviewed affirming the organization’s vision, mission and purpose and defining its strategic goals and objectives in the short, medium and long term; 

2. the organization’s strategy, purpose and values are aligned with its culture. All members of the governing body should act ethically, with integrity, lead by example and promote the desired culture. Behaviours across the organization should be continuously monitored,  measured and assessed to determine whether the desired culture has been embedded;

3. its decisions are implemented in a timely and transparent manner;

4. in its actions and/or conduct, it is accountable to the organization, its owners, employees and the wider community as it acts in the organization’s best interest;

5. the organization adheres to all relevant laws, regulations, rules, codes, practices and conventions;

6. owners and other stakeholders are periodically provided with accurate disclosures on the financial and operating results of the organization, including the overarching socio-economic and environmental ecosphere in which it operates, to enable them to properly understand the nature of the organization’s business, its current financial position and how it is performing against stated benchmarks and objectives;

7. it provides and continues to provide effective leadership to the organization, benchmarked against established, objectively assessed performance criteria and prudent controls, which enable performance to be measured from time to time;

8. oversight of the organization’s business is maintained with inter alia strategic planning, management selection, compensation of senior management, succession planning, stakeholder communications, internal controls, performance objectives, risk monitoring and management, codes of conduct and regulatory compliance, firmly in its hands;

9. the performance of the chief executive officer or equivalent is monitored with appropriate succession planning for executive management (or its equivalent);

10. adequate resources are provided and re-distributed to achieve the organization’s strategic goals and objectives;

11. operational risks that adversely impact business continuity are identified, prioritised and periodically updated with appropriate risk-abatement or risk-mitigation measures put in place, under the purview of a dedicated chief risk officer (or equivalent) answerable to the governing body;

12. policies which acknowledge and reward exemplary performance are implemented, to promote employee loyalty and fidelity to the organization;

13. the organization takes decisions to minimize the negative impact of its operations and ensure they do not adversely impact the ecology and natural environment and, in fact, sustain and improve the ecology, natural environment and society as a whole;

14. there is a clear division of responsibilities between the governing body and executive management (or equivalent) and within these unitary bodies, the respective duties and responsibilities are plainly identified so as to ensure and promote an effective balance of power, such that no single individual has unfettered control of the organization; and

15. disclosures for a reporting period are made in accordance with best practice for governance disclosure principles and not merely to discharge regulatory, statutory or legal requirements.

A-3(b) Capacity Building

The governing body should:-

1. ensure that it is of commensurate numerical size, guided by the scale and complexity of the organization, adequately resourced and competent, with the appropriate balance of skills, knowledge and experience to discharge its duties and responsibilities effectively;

2. make decisions (particularly high-value ones) based on accurate and reliable data and information which are evidence-based;

3. constitute appropriate committees (or their equivalent) and delegate (where necessary) their responsibilities in accordance with the organization’s approved by-laws, charters or constitution pursuant to the law and/or governance best practices, so as to enhance independent judgment and bring special expertise in areas such as audit, risk management, election to the governing body and executive remuneration; take collective and final responsibility and accountability for all decision-making;

4. promote diversity in gender, age, racial origins and educational backgrounds in its composition to permit the widest possible perspectives and views;

5. appoint to its members (at least in the minority) persons who are or are generally regarded as independent in character and judgment and are apolitical; and in so doing, determine the criteria or standards of independence;

6. include an appropriate combination of executive (that is, employed by the organization) and non-executive persons who offer constructive challenge, so that no individual or group can dominate decision-making in the best interest of the organization;

7. consider appointing an independent non-executive member of the governing body as a senior or lead independent member whose role should include leading the assessment of the performance of the Chairperson;

8. devise, implement and be governed by principle-based codes of conduct and ethical behaviour (in addition to those mandated by law for persons in public life) which encourage ethical conduct;

9. ensure that declarations of conflicts of interest and related party transactions are identified and recorded and that conflicts are managed appropriately;

10. conduct, at least annually, independent evaluations of the organization’s members, committees and the governing body as a whole, which critically assess performance, composition, diversity, competencies and attendances benchmarked against agreed criteria and metrics with appropriate induction and training opportunities; 

11. approve, in written form, various policies, charters or terms of reference, practices and conventions, which should be refreshed from time to time and accessible to stakeholders and, ultimately, the public at large;

12. ensure that all new members of the governing body devote sufficient time to a comprehensive, formal and dedicated induction process in order to understand the culture of the organization and the environment in which it operates. The induction programme should be tailored to the needs of the members of the governing body and implemented in phases to reduce information overload;

13. ensure that the skills of the individual members of the governing body are regularly refreshed through ongoing personal development and training programmes; and

14. develop a succession plan for the governing body that takes into account term limits, contingency planning for sudden and unforeseen departures and governing body refreshers that allow for business continuity and the maintenance of a diverse governing body in the future. 

A-3(c)The Chairperson (or equivalent)

The Chairperson or head of the governing body or equivalent should:-

1. provide effective leadership to the organization as a whole and, specifically, to the governing body and is responsible for its overall effectiveness; 

2. be a non-executive member of the governing body and preferably independent. He/she should not serve or operate as the head of the executive management (or its equivalent), and the division of responsibilities should be clearly defined in the organization’s approved by-laws, governing body charter or constitution;

3. set the governing body’s agenda with a primary focus on strategy, performance, value creation, culture, stakeholders and accountability and ensuring that issues relevant to these areas are reserved for the decision of the governing body;

4. shape the culture of the organization by ensuring that all views are heard and treated with respect while promoting a culture of openness and debate;

5. encourage all members of the governing body to engage in meetings of the governing body and its committees by drawing on their skills, experience and knowledge;

6. foster relationships based on trust, mutual respect and open communication – both in and outside the organization, with members of the governing body and members of senior management (or equivalent);

7. provide guidance and serve as a mentor to members of the governing body and senior management (or equivalent);

8. lead the annual evaluation of the governing body, with support from the Corporate Secretary and act on the results; and

9. ensure that the governing body, supported by the Corporate Secretary (or equivalent), has access to accurate and clear information on a timely basis, inclusive of access to independent advice when required.

A-3(d)Governance Meetings

1. The governing body should ensure that it conducts regular high level governance meetings (whether convened virtually or in person) including (but not limited to) meetings of the governing body and its committees with appropriate notice and chaired by the head of the governing body or the convener of the appropriate committee. These meetings should be characterised by formality, candour, decorum and dignity and should:-

1. be quorate (as provided for in the organization’s approved by-laws, charters or constitution);

2. be recorded in writing, with decisions, key considerations and deliberations minuted as determined by the governing body with the assistance of the Corporate Secretary (or equivalent) whether verbatim or in summary;

3. be chaired by a member of the governing body or the appropriate committee so designated by the members of the governing body or the appropriate committee, in accordance with the organization’s approved by-laws, charters or constitution;

4. be based on an agenda prepared by the Chairperson or the convener of the appropriate committee, in consultation with the Corporate Secretary (or equivalent) as approved by the members;

5. permit discussions and presentations by or through the Chairperson or the convener of the appropriate committee who dictates the pace and tone of the meeting;

6. encourage unanimity in decision-making but where members are deadlocked, a decision may be made by voting (save for ex officio members) by a show of hands and in such cases, the chair of the meeting has an original and casting vote; and

7. permit a dissenting member to have his/her dissent and the reason for the dissent recorded in the minutes.

1. Members of the governing body must be able to allocate sufficient time to meet their governance responsibilities and avoid overboarding. Meeting absences should be approved by the Chairperson (or equivalent).

2. Where virtual recordings of the meetings have been made and stored, these recordings should be retained or destroyed in keeping with the organization’s written policy or legal requirements.

A-3(e) Corporate Etiquette and Confidentiality

The governing body and its head should:

1. set the tone in relation to corporate etiquette and the confidentiality ascribed to decision-making by the governing body and members of the governing body and committees who are expected to maintain the confidentiality of the discussions, deliberations and decisions, save where such disclosure is required by law; and

2. ensure that important original documents including (but not limited to) incorporation papers, minutes, deeds and legal instruments of and concerning the organization including embossed seals, stamps and stationery are kept by the Corporate Secretary (or equivalent) as custodian and are adequately secured. All original documents should be secured.

A-3(f)The Corporate Secretary (or equivalent)

1. The governing body should ensure that it engages a Corporate Secretary (or equivalent) to serve as the organization’s chief governance officer and the ‘conscience of the organization’. 

(ii) While reporting operationally to the head of the executive management, the Corporate Secretary (or equivalent) is the conduit to and answerable solely to the the governing body, through the Chairperson (or equivalent). The appointment and termination of the Corporate Secretary (or equivalent) should be a matter for the governing body as a whole.

(iii)The Chairperson and Corporate Secretary (or equivalent) should periodically review the governance processes to confirm that they (the governance processes) remain fit for purpose and consider any initiatives which would strengthen the governance of the organization. 

A-3 (g) Remuneration policies

1. Remuneration policies and practices should be designed to support strategy and promote long term sustainable success. Executive remuneration should be aligned to organizational purpose and values and be clearly linked to the successful delivery of the organization’s long term strategy and objectives.

2. The governing body and executive management should be remunerated appropriately for similar duties and responsibilities at commensurate type and sized organizations, and the remuneration structures, as determined by the governing body, should reflect the responsibilities, as well as the competencies, qualifications and experience of the incumbent. The levels of remuneration for non-executive directors should reflect the time commitment and responsibilities of the role and should not include share options, a performance related pay scheme or pension benefits. Profitability, affordability and sustainability of the organization should be principles underpinning payments to all governing body members and executive managers (or equivalent).

3. The governing body should therefore:

   1. develop a formal policy on remuneration for the governing body members and executive management (or equivalent) which should include, where applicable, profit related bonuses and performance pay; and

   2. have regard to pay gaps between the remuneration of executive management and lower-level staff within the organization as well as the organization’s risk appetite and tolerance, in establishing its remuneration structure and policy.

A-3(h) The Remuneration Committee (or equivalent)

1. The governing body should:

1. consider establishing a committee with responsibility for remuneration that comprises a majority of independent non-executive members of the governing body. The Chairperson should not chair this committee and should only be a member if he/she is independent; and

2. approve the charter or terms of reference developed to guide the Remuneration Committee (or equivalent).

1. The Remuneration Committee (or equivalent) should be guided by a written charter or terms of reference, approved by the governing body, which should contain inter alia the following key responsibilities:

   1. consider and recommend to the governing body for approval, compensation packages for executive directors, senior management and non-executive directors’ fees, including the Chairperson;

   2. consider and recommend the organization’s remuneration policies to the governing body for approval and periodically review as necessary;

   3. within the terms of the approved remuneration policies, determine the payment of any bonuses, incentive awards, share options and/or other share awards to executive directors (or equivalent) and executive managers (or equivalent);

   4. report regularly to the governing body regarding the execution of the committee’s duties and how it has discharged its responsibilities, activities, any issues encountered and related recommendations; and

   5. work and liaise with other committees as necessary to ensure adequate interaction between committees and with the governing body.

2. In performing its responsibilities, the Remuneration Committee (or equivalent) should give consideration to, inter alia:

   1. the promotion of long term shareholding interests, including post-employment shareholding requirements, by executive management to minimise agency conflict;

   2. the realization of the organization’s purpose, goals and objectives, and the successful delivery of strategy to guard against rewards for failure or financial performance driven by unethical or corrupt practices;

   3. any actual or perceived conflicts of interest in the setting of remuneration packages;

   4. remuneration levels required to attract, retain and motivate talent;

   5. the views and perspectives of any independent remuneration consultant that may be retained to assist the committee; and

   6. the requirements of the approved Committee charter or terms of reference.

A-3(i) The Nomination Committee (or equivalent)

1. The governing body should:

1. appoint a Nominating Committee or equivalent, comprising persons of integrity, mandated to nominate persons based on merit and against objective criteria, for election to the governing body, so that there will always be persons with institutional experience on the governing body. The appointment process should be formal, rigorous and transparent. The nominating committee should comprise a majority of independent non-executive directors. The Chairperson of the governing body (or equivalent) may be a member and may chair the committee except when the committee is considering the Chairperson’s successor;

1. through the Nomination Committee or equivalent, assign members of the governing body to committees established by the governing body, on the basis of the members’ professional qualifications and experience in the relevant subject-matter, to facilitate the committees’ overall effectiveness; and 

2. approve the charter or terms of reference developed to guide the committee.

1. The Nomination Committee (or equivalent) should be guided by a written charter or terms of reference, approved by the governing body, which should contain inter alia the following key responsibilities:

1. lead the process to appoint, re-appoint or elect persons to the governing body and make relevant recommendations to the governing body;

2. recommend to the governing body, the assignment of governing body members to any committee established by the governing body, in consultation with the conveners of those committees;

3. regularly review the structure, size and composition of the governing body and make relevant recommendations to the governing body;

4. ensure that non-executive directors receive formal letters of appointment and in the case of executive directors, formal service contracts;

5. make recommendations to the governing body on matters relating to the continuation of office of a member of the governing body, including the suspension and/or termination of the member in accordance with the approved by-laws, his/her letter of appointment or service contract; 

6. report regularly to the governing body regarding the execution of the committee’s duties and how it has discharged its responsibilities, activities, any issues encountered, and related recommendations; and

7. work and liaise with other committees as necessary to ensure adequate interaction between committees and the governing body.

1. In performing its responsibilities, the Nomination Committee (or equivalent) should give consideration to:

1. the current and future needs of the organization relative to skills, qualifications, background, personal attributes, experience and diversity;

2. the breadth of skills, qualifications, backgrounds, personal attributes, experience and diversity at the senior and middle managerial level to facilitate the development of a pool of talent and succession pipeline;

3. skills matrices that map the existing skill set against the organization’s current and future needs;

4. the findings of any evaluation conducted on the governing body, committees and individual members of the governing body;

5. training and continuous personal development completed and/or pursued by the members of the governing body;

6. publicly advertising vacancies on the governing body and working with recruitment experts to fill those vacancies;

7. the term limits of each member of the governing body and the rotation requirements contained in the organization’s approved by-laws, governing body charter or constitution;

8. the time commitments of the existing and proposed members of the governing body to prevent overboarding; and

9. the requirements of the approved committee charter or terms of reference.

A-4 Expected Outcomes

Having applied the recommendations stated here, in accordance with the size, sector and complexity of the organizations, it is expected that organizations will achieve the following key outcomes:-

1. A culture that aligns with the organization’s purpose, values and strategy;

2. Effective governing body performance;  

3. Reduced potential for corporate scandals; 

4. An organization that fosters improved stakeholder trust; and

5. Improved ethical leadership and governing body effectiveness.