board dynamics-role and functions of the board

8/6/2019 Board Dynamics-Role and Functions of the Board

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RICHARD WEJULI WABWIRE

CORA CONSULT



2

` Definitions: Corporate Governance/Board of Directors

` Key Roles & Responsibilities of the Board of Directors

` Fiduciary Duties

`

Board Dynamics` Group think

` Managing Board Dynamics

` Conclusion



3

Corporate Governance is a mechanism through which boards and directorsboards and directorsare 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, leadershipleadership, direction and

control.

³³The importance of The importance of

corporate governancecorporate governancelies in its contributionlies in its contribution

both to businessboth to business

prosperity and toprosperity and to

accountability.´accountability.´

Paragraph 1.1, Committee on

Corporate Governance:

Final Report Hampel Committee

³Corporate governance is concerned with³Corporate governance is concerned with

holding the balance between economic andholding the balance between economic and

social goals and between individual andsocial goals and between individual and

communal goals««communal goals«« TheThe aim is to align asaim is to align as

nearly as possible the interests of individuals,nearly as possible the interests of individuals,

corporations and society.´corporations and society.´

Sir Adrian Cadbury

Corporate Governance Overview, 1999

[World Bank Report]



4

o Leadership for efficiency««

o to compete in the global economy, create jobs

o Leadership with probity «..

o because investors require confidence

o to provide assurance of management's integrity

o Leadership with responsibility«.

o to take account of broader stakeholder interests

o

Leadership that is accountable and transparent

o to build trust in companies and in the economy !!

4



` Primary responsibility rests with the Bank¶s board and Senior management

` The Central Bank (BOU) has an important role to play by providing guidance &

assessing bank practices (Financial Institutions Act)

` Other stakeholders can promote good governance;

Shareholders

Depositors & customers

Employees

Auditors

Uganda Institute of Bankers Credit Reference Bureau

Government, Capital markets Authority, Uganda Securities Exchange

5



6

A group of people (directors)

appointed or elected by

shareholders to align the

company¶s governance,

performance and

conformance by;

� Offering strategic direction to

the company

� Oversight

� Exercising Fiduciary

responsibility

³A director is any person

occupying the position of a

director by whatever name

designated, including any

person with whose

directions or instruction the

directors of a corporation

are accustomed to act´.



7

³The board should exercise compelling and relentless leadership³The board should exercise compelling and relentless leadership

and should not underestimate the power of leading by exampleand should not underestimate the power of leading by example --

evidenced by high levels of visibility and integrity, strongevidenced by high levels of visibility and integrity, strong

communications, and demanding expectations. This leadershipcommunications, and demanding expectations. This leadership

should be clear toshould be clear to allall within the organization, as well aswithin the organization, as well as

shareholdersshareholders andand other stakeholdersother stakeholders .´.´

BoardroomBoardroom BehaviorsBehaviors

A report prepared for Sir David Walker A report prepared for Sir David Walker

by the Institute of Chartered Secretaries and Administrators , UK by the Institute of Chartered Secretaries and Administrators , UK

June 2009June 2009



o Governance

o Conformance

o Performance

Board Chairman

Chief Executive Officer/Managing Director

Board Committees (executive and non-executive directors)

8



I Governance:

o Exercise of power through oversight, strategy, policies and

delegation

o

Stewardship of company values- professionalism, quality,integrity, quality, teamwork etc

II Conformance

Compliance with laws, industry best practice & standards- FIA,

BOU Act, UIB, ICGU, Co¶s Act, Accounting, Audit, Risk mgt, Tax

Laws, Investment Laws, Procurement Laws, Employment Laws

Social Security Laws etc

9



III Performance,

o Establish corporate strategy (risk mgt, human resource,

remuneration, business plans, monitoring and evaluation ,

budget review and approvals etc)

o Set performance objectives and Indicators

o Monitor and evaluate Corporate, board and management

performance

o Resource/assets mobilization, deployment and oversight

o Stakeholder engagement

10



o Setting Tone at the top

o Defining Business Philosophy

o Independent of the influence of Management

o Clearly know their responsibilities and powers

o Focus on Policy Making and general direction

o No role in day to day affairs

o No conflict of interest

o Understand the bank¶s risk profile

Hence training programs for Board of Directors , IMPERATIVE!

11



12

` Putting in place board governance arrangements

Board committees to support decision process

Supporting functions to regulate processes

Board procedures and rules, e.g. conflicts of interest

Delegated authorities for management

` Ensuring proper oversight and supervision

Management reporting and public disclosures

Assurance processes and controls

12



13

o Primary role

Provide overall leadership to the board

o Function

Principal link between board and CEO/management team

Responsible for board agenda and work plan

Work with board committee chairpersons

Should be involved in selection and induction of new directors Counsel individual directors on their performance

13



14

o Primary role

Lead the management team, reporting to the board

o 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 company¶s long-term sustainability

14



` Preferably comprising non-executive board members, in the areas of:

Audit

Risk Management

Human Resource

Credit

Remuneration

Others e.g. EHS/OHS, Corp. Governance

` With well defined TORs/objectives, authorities and tenure

` Without indulging in day to day affairs- no executive powers

` Full board to review their performance

15



16

o Assist the board in its decision making Bring together non-executives and management

Allow detailed discussion on management matters

But, filters out operational issues that remain with management

Focus on strategic decisions required of the board

o Supports board responsibilities in key areas

Audit, internal controls and risk

Executive compensation and management appointments Governance issues and corporate policies

Nomination and selection of non-executive directors

Others, e.g. health, safety, environment, etc.

16



17

Supervises and co-ordinatesboard papers &presentations

Takes the minutes of board meetings

Resolves organizationalmatters for board meetings

orks closel ith hairmanand on board agenda

Arranges the annualshareholders meeting andother special meetings

nsures compliance iththe board procedures

versees, conductsinduction trainings for ne l appointed directors

xplains the proceduralrequirements of la s, the Memo& Arts, b ±la s and policies of the compan and industr

Ke link bet een companand non-executive directors

ounsel and support tonon-executives, liaison

ith external stakeholdersetc

17



19

Board¶s Role in Risk Management

ooThe board should know about and evaluate the:The board should know about and evaluate the:

o Most significant risks facing the Bank

o Possible effects on stakeholders

o Bank¶s management of a crisis

o Importance of stakeholder confidence in the Bank

o Communications with the investment community

19



20

Board¶s Role in Risk Management

ooTheThe board should ensure that:board should ensure that:

o Sufficient time is devoted to discuss risk strategy

o Appropriate levels of awareness exist throughout the Bank

o Risk-management processes work effectively

o A clear risk-management policy is published

20



21

³The board should exercise compelling and³The board should exercise compelling and

relentless leadership and should not underestimaterelentless leadership and should not underestimatethe power of leading by examplethe power of leading by example -- evidenced byevidenced by

high levels of visibility and integrity, stronghigh levels of visibility and integrity, strong

communications, and demanding expectations. Thiscommunications, and demanding expectations. This

leadership should be clear to ALL

within theleadership should be clear to ALL

within theorganization, as well as shareholdersorganization, as well as shareholders andand other other

stakeholdersstakeholders .´.´

BoardroomBoardroom BehaviorsBehaviors

A report prepared for Sir David Walker A report prepared for Sir David Walker

by the Institute of Chartered Secretaries and Administrators , UK by the Institute of Chartered Secretaries and Administrators , UK

June 2009June 2009



o Appointing the MD and Senior Management

o Defining powers and responsibilities of senior management

o Disclosing conflict of interest

o Ensuring disclosure to promote transparency and marketdiscipline

o Formulating policies :Credit, Investments and Treasury

Management, Human Resources, Internal Audit and Control,

Compliance, Risk Management etc

o Communication and compliance

22



Internal Audito Creation of separate department of Internal Audit, with

o Professional Staff

o Full Scope coverage

o Audit Charter & Manual

o Head of Internal Audit reporting to the board or the Audit Committee

Management Information Systems

` Ensuring existence of an effective Management Information System

` For keeping itself abreast with

Activities

Operating Performance & financial condition

Operating environment

Major Risks

23



Board Meetings

o At least quarterly, preferably more frequently

o Individual Directors should attend at least half of the meetings in a year

o Information through agenda items in advance

o

Recording minutes of deliberations proper in detail

Others

o Reviewing the effectiveness of Internal Controls

o Strengthening Risk Management

o

Annual Financial Statements :o Coverage of Directors¶ Report

o Statement on Internal Controls

o Risk Management Framework

24



Statutory duties are stipulated in the enabling instrument (FIA, BOU Act,

Memo & Arts)

o Fiduciary duties generally arise by virtue of the common law

relationship between principle and agent (i.e. the Bank and the

Board/Management)

o However in the Banking industry there is a degree of statutory

enactment on fiduciary duties (the FIA)

25



y Fiduciary duties include;

y the duty of care and skill,

y duty to act in good faith,

y duty of fair dealing

y

Breach of these fiduciary duties may lead to civil

liability (damages, financial penalties)

26



Section 56 FIA

³ A director shall in relation to the financial institution in which he serves, stand

in a fiduciary relationship and shall in addition and without derogation owe the

financial institution and its shareholders the following duties:

� A duty to act honestly and in good faith;

� A duty to act in the best interests and for the benefit of the financial

institution;

� A duty to act independently, free from undue influence of any other

person;

� A duty to access necessary information to enable him or her discharge

his or her responsibilities.

� A duty to understand a directors¶ duties´

27



28

Duty to exercise a reasonable standard of care and skillDuty to exercise a reasonable standard of care and skill

y Requires the Directors act carefully in carrying out their responsibilities.

y They must be prudent (standard of care is that expected of a knowledgeable

and skilled person´ managing their own business- (see Justice Katusi

comments in Ruling of Uganda vs David Jamwa) ±not of an ³ordinary man«´

y Directors must Keep informed and must make inquiries before decisions are

made.

y Keep abreast with the company affairs, industry trends and global activities.

28



29

Exercise ³reasonable´ supervision and control over the

affairs and activities of the corporation

Special business acumen or expertise not necessarily

required

Not necessarily liable for errors of judgment

However, given events following financial crisis, will this

change?

29



30

Duty of fair dealing

y Duty to conduct all transactions with the bank in a forthright and

fair manner that is fair to the interests of the Bank

y Directors should not take advantage of corporate opportunities

and should not engage in competition with the Bank.

y They should not to abuse of power or information

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31

Duty to act in good faith

y Act in the interests of the company, no personal profit.

y To act within their powers.

y To act solely in the benefit of the Principal (even in the case of

stakeholder representative Boards)

y Up hold qualities of loyalty

y Disclose conflict of interest situations

31



� Board members hold alternative professional, business and public

responsibilities that could potentially influence their behaviour, conduct

and or thinking

� Management is constantly required to make decisions in a context of varied challenges, circumstances and expectations.

` A conflict of interest management framework is therefore imperative;

appropriate disclosure

formal / legitimate processes handle CoI in the best interests of the Bank(NOT OF THE STAKEHOLDERS)

32



33

³³The legal framework and company chartersThe legal framework and company charters

((M emo & Arts)M emo & Arts) shouldshould not permit practicesnot permit practices(such as ³pre(such as ³pre--meetings´ and instructions onmeetings´ and instructions on

how to vote by shareholders whose voteshow to vote by shareholders whose votes

placed a director on the board) whereinplaced a director on the board) wherein

shareholders may limit the ability of directorsshareholders may limit the ability of directorsto exercise their duties to act in the bestto exercise their duties to act in the best

interest of the company and allinterest of the company and all

shareholders.´shareholders.´

Paragraph 90, OECD¶s White Paper onParagraph 90, OECD¶s White Paper onCorporate Governance in Latin AmericaCorporate Governance in Latin America



34

o Board Charter setting out procedural rules

o Clarifies leadership roles and core responsibilities

o Reserves matters specifically reserved to board

o Sets management delegations and reporting arrangements

o Comprehensive induction for new directors

o Legal and regulatory obligations

o Financial structure of business, budgets and KPIs

o Understanding of strategic priorities and current status

o Familiarize with business operations, e.g. site visits

o Annual board work plan

o Meetings and budget cycle, annual reporting

o Code of ethics or statement of business principles

o Defines corporate values and conduct of staff and directors

34



35

`

Do I believe I have all the information?` Have I the necessary skills to make this

decision?

` Do I have any conflict in this matter?

` Objectively, is this a rational business decision?

` Can I explain this in a transparent manner?

` Is it a responsible discharge of my duties?

35



36

Boarddynamics

Boarddynamics

³Dynamics´ = Greek word for ³force´³Dynamics´ = Greek word for ³force´

(Oxford English Dictionary)(Oxford English Dictionary)



o Generally, in terms of formal aspects of governance, there is usually no significant

difference between good and bad boards

o Directors attend meetings

o Board members are trained and experienced/professionals

o Ably appreciate and deliberate on business risk

o Independent directors on Board

o Board committees usually in place

37



o But what then makes some boards and companies more functionally successful than

others in governance terms?

o Dysfunctional social systems within the company

o Intangible, immeasurable invisible factors

o Hence the quest for prudent management of ³Board dynamics´ .

38



` Board dynamics is about social processes of interaction on the Board.

` These dynamics can be triggered off by:

x Personality traits ± e.g. facial expressions, appearance, manner of speech,

voice, dress, body language

x

Gender x Affiliations- social, professional, religious, political diversity etc

` And catalyzed by:

� Ego and sensitivities

� Fear, expectations, envy, complexity.

� Disparity of opinion, profession and other dispositions.

� Respect, trust and candor or lack of them.

39



o Board size may influence Dynamics.

o too Small, limits range of inputs.

o too big, may divert focus

o Onset of Board Dynamics may be at induction organized for new directors , in the

course of latter interactions, upon acquisition of some information ±usually prejudicial

information etc;

40



` The strength of the Board lies in its ability to incorporate many different,

sometimes, strongly held perspectives in making decisions

` It is critical to exploit and deploy these dynamics to benevolent cause.

` All dynamics that interfere with ability of the board to execute its mandate

must be faced and managed

Important to ensure that all members understand their roles

Avoid individual dominance

Encourage participation by all

Promote an open, trusting climate

41



` Use outside resource/expertise if necessary to work through and establish

protocols for addressing sensitive and potentially contentious issues.

May help to enhance level of understanding and objectivity.

` At meetings, if there is a lot of tension and misunderstanding, briefly adjourn or

postpone contentious issue to allow for consideration of other perspectives and

seek more information.

` Be wary of the ³Group think´ syndrome!

42



Groupthink is;

i. A phenomenon in which group members are so

committed to the group that they are reluctant to expresscontrary opinions.

ii. Members¶ striving for unanimity overrides their motivation

to realistically appraise alternative courses of action.´

43



Symptoms of groupthink

Excessive optimism

An assumption of inherent morality

Suppression of dissent

An almost desperate quest for unanimity.

Do not rock the boat

It is okay not to talk about problems

Increased probability of poor decisions.

Debate is curbed

Escalation of Commitment.

44



Escalation Of Commitment

A decision making trap where people get locked into losing courses of

action to avoid the embarrassment of quitting or admitting error.

You insist you are right even when you know you are wrong, because of

the sunk cost.

You have invested so much that you can¶t afford to lose.

You defend the indefensible.

45



Challenges of group think;

Discussion and stressful interaction may be viewed as negative

Debate is curbed and silence is taken as consent

Compromise decisions may satisfy nothing.

Poor decision making

Unanimous vote can be wrong.

46



Challenges of group think contd..;

Groupthink reduces dissent and opinion diversity.

� A Board without divergence of opinion is a dead Board!!

Intelligent policy makers can make incredibly unwise decisions.

No clear focus for decision responsibility.

Wasted resources.

How then can group members feel free to express their views knowing

that they conflict with those already expressed?

47



Promote an open and honest climate

x cultivate an open, respectful interactive and mutual trust

relations across the Board and between the Board and

management

Urge members to be critical evaluators ±especially for all non-

minor decisions

Nurture devil¶s advocates to challenge assumptions /alternatives

48



Question consequences of various actions.

Generate options, there are always alternatives.

Use objective criteria to decide.

Avoid ;

� isolation on the team.

� using the team to rubber-stamp predetermined

positions.

49



o Avoid being too directive- it is good practice for the chair to withhold opinion

until all others have spoken.

o Regularly evaluate the functionality of the board

o

Align individual or personal attitudes and competences to supportfunctionality of the Board.

o Do not stereotype

o Arrange for direct reports from advisors and consultants

o Invite critics and or external experts to present their views

50



o Separate people from the problem.

o Focus on interests, not positions.

³ focus on the fight in the dog, not the dog in the fight´

Create an effective Board culture!!

51



Possible decision criteria

oOpportunity for corporate gain

oRisk of loss

o Availability of resources

oCost

oProfessional standards

oStatutory /regulatory compliance

oMarket value

oTime urgency

52



Run meetings effectively, avoid the following ³time

Wasters´;

o Confirmation of previous meetings.

o

Matters arising.o Late delivery of Board Papers.

o Non-reading of documents.

o Substandard and poor quality of Board documents.

o AOB

53



Sample Agenda1. Prayer

2. Apologies

3. Adoption of Agenda

4. Declaration of interest

5. Communication from the Chair 6. Adoption/Approval of minutes

7. Action Report from previous minutes

8. The CEO¶s update/Report-( sometimes not applicable)

9. Business of the meeting

10.Date of next meeting.

NB: AOB is discouraged.

If any issue is worth discussing, then list it on the Agenda!!

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55

o Balanced executive and non-exec. participation

o Effective selection process

o Key personal and professional attributes

o Skills aligned to business

o

Some general guidelineso Must have time to devote to responsibilities

o Must exercise judgment in best interests of the company

o Must be informed about the business, industry and the markets

o Must avoid interest conflicts between personal and business affairs

o Must treat board information confidentially not necessarily secretly!

o Should act objectively and be receptive to other perspectives

o Should prepare adequately for meetings and attend regularly

55



o Dominant personality

o Hurried decisions based on inadequate data

o Serial restructuring, redeployment and resignation of key Executives

o ³do as I say, not as I do´

o The cover up spiral

o Interference with the information flow-focus on public reaction rather than issues.

o Poor communication dynamics (informal, indirect, incomplete, delayed etc)

o Always on the defensive modus operandi

o Forecast versus final results chronic/curious adverse variances

o ³No one is responsible´

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57

I n conclusionI n conclusion



Beware of adversity of cliques

o Diversity per se is usually healthy and useful.

o Diversity may however generate its own negative dynamics-cliques can spring up

based on gender, profession , matrimonial status, age, language, ethnicity,

religious denomination, perceived/real differences in social standing etc

o Rivalry and Sabotage

58



Exploit the strength from diversityExploit the strength from diversity

� Range of Competencies adds value.

� Diversity of thought enriches board deliberations.

� Healthy competition my enhance quality, etc.

� Broader perspectives for problem analysis.

� More knowledge, and alternatives are availed.

� Diversity clarifies ambiguity and reduces uncertainty.

� Participation fosters satisfaction and support.

59



The board should understand its oversight role

o Board members should

o be qualified for their positions,

o have a clear understanding of their role in corporate governance and

o

be able to exercise sound judgment about the affairs of the bank

o Some responsibilities are unique to the banking sector:

o Promote bank safety and soundness

o Understand the regulatory environment

o Ensure that the bank maintains an effective relationship with

supervisors

60



The Board of directors should approve and oversee the bank¶s

strategic objectives and corporate values, communicated

throughout the organisation

o Standards should address, among other things:

o Corruption

o Self-dealing

o Other illegal, unethical or questionable behaviour

o Employees should be encouraged to raise concerns about illegal or

unethical practices to the board or an independent committee without fear

of reprisal or retaliation- ³ whistle blower ³ framework

61



Watch out for practices that could diminish the

quality of corporate governance. e.g.

Internal lending ( to officers, employees, board members or

controlling shareholders)

Preferential treatment for related parties and other favoured entities

Conflicts of interest

o T he board should ensure senior management implements effective

policies to prevent ( or limit) such activities

62



The board of directors should set and enforce clear lines of responsibility and accountability throughout the organisation

o Role of the board:

o Define authorities & key responsibilities

o Oversee management actions

o Senior management¶s role:

o Delegate to staff & promote accountability

o Be responsible to the board for bank¶s performance

o Guidance also addresses:

o Accountability to Shareholders and of branches to Hqtr.

o Outsourcing of bank functions/strategic co-operations

63



The board should ensure that there is appropriate

oversight by senior management consistent withestablished standards, policies and legal requirements

o Senior management should:

o Have the necessary skills to manage the business

o

Oversee line managers consistent with board policies ( but beware of folly of ³ micro-managing´ line managers)

o Under board¶s guidance, establish system of internal controls

o Apply the ³ four eyes´ principle, even in smaller branches

o Watch out for senior managers who are unwilling or unable to

exercise effective control over ³ star employees´

64



The board and senior management should effectively utilise

the work conducted by the internal audit function, externalauditors and internal control functions

o Internal audits ± the board & senior management should:

o Recognise & communicate importance of audit & internal control

processes throughout the bank o Use the findings of internal audits and require timely correction of

problems by management

o Promote the internal auditor¶s independence, e.g. through reporting to

the board or board¶s audit committee

o Engage internal auditors to evaluate effectiveness of key internal controls

65



The board and senior management should understandthe bank¶s operational structure, including where thebank operates through structures, that may impedetransparency (i.e. ³know-your-structure´)

o Banks sometimes employ structures, that lack or impair transparency

o T his sometimes occurs for legitimate business purposes «

o But doing so can:

o Pose significant financial, legal and reputational risks for the bank

o Impede board and senior management oversight

o M ake it more difficult for authorities to effectively supervise the bank

66



� Risks should be appropriately assessed and managed

� Information regarding the activities and risks should be easily available at the bank¶s

head office & reported to the board and bank¶s supervisors

� Clear policies and procedures should exist for the identification and management of

material risks

� Regularly evaluate the need to use structures that reduce transparency.

� Set clear corporate governance expectations for all relevant entities and business

lines

� Assess compliance with applicable laws and internal policies

� Activities should be subject to enhanced audit procedures and internal control

reviews

67



68



69

TAKE HOME: Self TAKE HOME: Self

assessment of your assessment of your

corporate governancecorporate governance

structure against the FIAstructure against the FIA

20042004



` Section 4(2)(j)

The BOU shall supervise, regulate, control and

discipline all financial institutions......´

70



Pr i i ir t ti

Section 52 Board of at least five directors headed by non-

executive director

Directors must pass a fit and proper test (Schedule

3 of the Act)

Section 53 Directors must be approved by the central bank

Section 54 Directors shall not take part in a discussion or

decision here they have a conflict of interest or

any of their related interests have an interest

Section 55 he Board is responsible for ood corporateovernance and business performance

71



� the Central Bank shall have regard to

� general probity

� Competence and soundness of judgment

� Diligence

� Whether the interests of the depositors or potential

depositors are likely to be threatened by that person

holding the position of director.

72



` the Central Bank shall also consider any evidence that:

� The person has been convicted of an office regarding fraud or other

offence of which dishonesty or violence is an element;

� Has contravened any law designed to protect the public from

financial fraud;

� Was a director of an institution that has been liquidated;

� Has taken part in any business practice that ³in the opinion of the

Central Bank was deceitful, oppressive, fraudulent, prejudicial or improper or reflects discredit on his/her business conduct

73



Pr i i ir t ti

Section 55 Board is in full control of the affairs and business

operations of the Bank

Board ensures that the business of the Bank is

carried out in compliance with all applicable laws

and regulations and is conducive to safe and soundbanking practices

Ensures reporting to shareholders at the AGM

Ensures that internal controls and systems and the

management information systems do the following:

74



Pr i i ir t ti

Section 55 - Designed to provide reasonable assurance as to

the integrity and reliability of the financial

statements of the Bank and to safeguard, verify

and maintain accountability of Bank assets;

- Based on established and written policies andprocedures;

- Implemented by trained and skilled officers with an

appropriate segregation of duties;

- Continuously monitored, reviewed and updated by

the Board to ensure that no breakdown occurs

75



Pr i i ir t ti

Section 55 The directors shall appoint from amongst

themselves 2 executive directors:

- Resident in Uganda;

- ave no ledge of the manner in hich the

an ¶s longer strateg is pursued in practice and

have the a ilit to influence its policies;

- le to effectivel direct the usiness of the an .

- ppl the ³Four-e es´ principle

76



Pr i i ir t ti

Reg. 6 Board to establish strategic objectives and

corporate values that have been communicated

throughout the Bank

One of the values is the importance of having timely

and frank discussion of problems and theprohibition of corruption and bribery in Bank

dealings

Board should ensure that Management does not

operate as to diminish the quality of corporate

governance

77



Pr i i ir t ti

Reg. 6 Clear demarcation of responsibilities of the board

and management

Board together with CEO to develop a position

description for the CEO defining limits to

management¶s responsibility

Board to approve the corporate objectives which

are entrusted to the CEO and basis for measuring

the CEO¶s effectiveness in achieving these

Board to perform annual performance evaluation of

CEO

78



Pr i i ir t ti

Reg. 6 Board to ensure that directors are qualified for their

positions and have a clear understanding of their

role in corporate governance and are not subject to

undue influence from management or outside

concerns At least 5 of the directors possess demonstrated

expertise and experience relevant to the functions

of the Bank

Not more than 50% of the directors to be

employees of the Bank or any of its subsidiaries or

affiliates

Orientation program for all new directors and

refresher programs

Board to perform annual performance evaluation of

CEO

79



Pr i i ir t ti

Reg. 6 Board receives on a timely basis, sufficient

information to judge the performance of

management and assess the quantitative

performance of the Bank

Board meetings are held at least once every quarter

hairperson ensures that clear and complete

minutes of Board meetings are circulated to the

Board

o director is serving simultaneously on the board

of another financial institution

Board to ensure that there is appropriate oversight

by senior management

80



Pr i i ir t ti

Reg. 6 Board to formulate clear policy on risk management

and to recognize the importance of the audit

process

Board and senior management to take measures to

enhance the independence of the internal auditor Board and senior management utilize in a timely

manner, the findings of internal and external

auditors

Board and senior management engages external

auditors to judge the effectiveness of internal

controls

81



Pr i i ir t ti

Reg. 6 Board approves the compensation of senior

management and key personnel

Salary scales should not overly depend on short

term performance

Feedback from stakeholders is properlydocumented and procedures have been established

to deal with concerns

Reg. 7 Board to establish specialized committees of

directors for in-depth review of issues

Board Committees to include Audit Committee, Asset Liability Management Committee, Risk

Management Committee, Compensation Committee

82



Pr i i ir t ti

Reg. 7 Audit Committee to constitute at least 2 directors

who are NEDs

RMC to provide oversight of the senior

management's activities in managing credit, market,

liquidity, operational, legal and other risksCompensation Committee provides oversight on

remuneration of senior management and other key

personnel consistent with the Bank¶s culture,

objectives and strategy

Appointment of internal and external auditors

board dynamics-role and functions of the board

Documents