Transcript Document

THE ROLE OF THE
DIRECTOR AND THE
BOARD
KWAME BOSIAKO OMANE-ANTWI
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K. B. OMANE-ANTWI
Tuesday, July 21, 2015
COURTESY:
 EXTREME NETWORKS, INC. , (January 12, 2012)
 Standards for the Board, Institute of Directors The Independent
Director, IoD/Ernst & Young Running a limited company, David
Impney & Nicholas Montague, Jordans © 2000 Brefi Group
Limited http://www.corporatecoach.co.uk/
 MORRISON & FOERSTER LLP
Christop+her M. Forrester Celeste S. Ferber
RR Donnelley Global Capital Markets Fourth
 Baginsky Cohen Chartered Accountants
930 High Road London N12 9RT
 Nick Gould - [email protected]; June 2008-
 NATIONAL BUREAU OF ECONOMIC RESEARCH
1050 Massachusetts Avenue
Cambridge, MA 02138
November 2008
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AGENDA
Introduction
Interaction among the Board
Board Dynamics
Board of Directors
Composition of the Board
Duties of Executives & Non Executive Directors
Powers of Directors
Duties of Directors
Role of Board of Directors & Management
Fiduciary Duty
Role of Directors
Responsibility of Directors
Non Executive Directors
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INTRODUCTION
In managing corporation’s business and affairs , boards typically act
in a role, and delegate the details of the day-to-day management of
the business to the officers of the corporation.
This construct provides a balance between the managers (officers)
who have actual and apparent authority to direct and control the
daily activities of the business and the overseers (directors) who
have the ultimate responsibility for the corporation and the power
and responsibility to supervise the managers.
The directors clearly are fiduciaries of the corporation and as a
group have the ultimate power and authority over the management
of the business through their ability to hire, supervise and replace
the mangers
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THE INTERACTION AMONG THE BOARD, THE
CHIEF EXECUTIVE OFFICER
AND THE OTHER OFFICERS
In general, most boards seek to fulfill their
obligation to supervise the managers primarily by
consulting with the corporation’s most senior
officer (usually the chief executive officer) on
major decisions affecting the business, and
reviewing, guiding and ultimately supervising the
performance of the chief executive officer.
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THE INTERACTION AMONG THE BOARD, THE
CHIEF EXECUTIVE OFFICER AND THE OTHER
OFFICERS (Cont’d)
The chief executive officer, in turn, generally is
charged with the power and authority to supervise the
other officers, who report directly to the chief
executive officer rather than the board. Beyond the
chief executive officer, typical officer positions and
their general responsibilities are as follows:
The CEO : The Chief Executive Officer generally is
responsible for the supervision of the other officers
and the day-to-day management of the business.
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THE INTERACTION AMONG THE BOARD, THE
CHIEF EXECUTIVE OFFICER AND THE OTHER
OFFICERS (Cont’d)
Secretary: The secretary is the person
responsible for keeping the books
of the
corporation, including the corporate minute
book. As such, the secretary attends board
meetings to keep minutes, although the
corporation’s legal counsel is sometimes charged
with preparing the initial draft of the minutes.
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THE INTERACTION AMONG THE BOARD, THE
CHIEF EXECUTIVE OFFICER AND THE OTHER
OFFICERS (Cont’d)
Treasurer: The office of treasurer is generally
the most senior financial position in the
corporation, although companies often use the
title chief financial officer as the most senior level
financial position.
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THE INTERACTION AMONG THE BOARD, THE
CHIEF EXECUTIVE OFFICER AND THE OTHER
OFFICERS (Cont’d)
 The Deputy CEO: The Deputy Chief Executive
Officer can be appointed to oversee specific business
functions, such as sales, marketing, research and
development, finance, etc.
Although generally Deputy Chief Executive Officer is
appointed by and report to the board, the bylaws may
provide that certain vice presidents may be appointed
by (and report to) the officers of the corporation, such
as the chief executive officer or president.
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BOARD DYNAMICS
Just as a president or chief executive officer is
responsible for the daily management of the
business, the chairperson of the board is generally
responsible for managing the affairs of the board.
Most corporations provide in their bylaws that the
chairperson of the board is empowered to call
board meetings, set the agenda for the board
meetings and preside over board meetings.
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BOARD DYNAMICS (Cont’d)
The specific manner and timing of calling board
meetings is specified in a corporation’s bylaws,
but many corporations use as a default rule that
board meetings can be called on some minimum
advance notice (e.g., four days’ notice if the notice
is given by mail or 48 hours’ notice if the notice is
given by telephone or other electronic means, such
as email).
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BOARD OF DIRECTORS
A board of directors is a group of individuals
elected to represent the interest of the
shareholders in a publicly traded corporation.
The board has two primary responsibilities, an
advisory role for strategic planning and an
oversight role, which helps align the interests of
the firm’s management with the interests of the
shareholders.
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COMPOSITION OF THE BOARD
A board of directors
usually has 12 to 15
members, although it varies per company. Inside
directors are current employees, gray directors
may have some affiliation and independent
directors have no affiliation with the firm other
than serving on the board.
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DIRECTOR QUALIFICATIONS
Directors should possess the highest personal and
professional ethics, integrity and values, and be
committed to representing the long-term interests
of our stockholders.
Board members are expected to rigorously
prepare for, attend, and participate in all Board
and applicable Committee meetings.
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DIRECTOR QUALIFICATIONS
(Cont’d)
The Nominating and Corporate Governance
Committee is responsible for reviewing with the Board
from time to time the appropriate skills and
characteristics required of Board members in the
context of the current make-up of the Board.
This assessment should include issues of diversity,
age, skills such as understanding of technology,
finance and marketing, and relevant international
experience - all in the context of an assessment of the
perceived needs of the Board at that point in time.
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DIRECTOR INDEPENDENCE
The Board believes that, as a matter of policy and
consistent with applicable laws, rules and regulations,
at least three-fourths of the members of the Board shall
be independent directors.
In making a determination regarding a director’s
independence, the Board shall consider all relevant
facts and circumstances, including the director’s
commercial, industrial, banking, consulting, legal,
accounting, charitable and familial relationships, and
such other criteria as the Board may, in its discretion,
determine relevant.
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DIRECTOR INDEPENDENCE (Cont’d)
To be deemed independent in any calendar year, a
director must satisfy the definition of independent
director as that term is defined in Rule 5605(a)(2)
of the NASDAQ rules or such successor regulation
as may be applicable.
A director must also satisfy the following
qualifications:
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DIRECTOR INDEPENDENCE
(CONT’D)
has not been employed by the Company or any subsidiary
or affiliate (defined as any individual or business entity
that owns at least 5% of the securities of the Company
having ordinary voting power) within the last five calendar
years;
has not received, during the current calendar year or the
immediately preceding calendar year, remuneration,
directly or indirectly, as a result of service as, or
compensation paid to an entity affiliated with the
individual who serves as: (i) an advisor, consultant, or legal
counsel to the Company or to a member of the Company’s
senior management; or (ii ) a significant customer or
supplier of the Company;
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DIRECTOR INDEPENDENCE
(CONT’D)
has no personal services contract(s) with the
Company, or any member of the Company’s
senior management;
is not a employee, director, or advisory Board
member of a not-for-profit entity that receives
contributions in excess of $50,000 in a given
year from the Company;
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DIRECTOR INDEPENDENCE
(CONT’D)
is not employed by a public company at which
an executive officer of the Company serves as a
director;
has not had any of the relationships described
above, with any affiliate of the Company; and
is not a member of the immediate family of any
person who fails to satisfy the qualifications
described above
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DUTIES OF EXECUTIVE AND
NON EXECUTIVE DIRECTORS
Directors of Companies
Directors of companies whether public or private
have various responsibilities towards their
companies, breach of which may not only be
detrimental to those companies and their
shareholders but also may lead to civil and
criminal liability of the individual director
concerned.
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“EXECUTIVE AND NON EXECUTIVE
DIRECTORS”
Executive and Non Executive Directors have the
same responsibilities in law. An “Executive Director”
is a director who has separate responsibilities within
the company as an Executive.
The role of a non executive director has a positive
contribution to making and ensuring that the board
fulfills its main objectives.
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“EXECUTIVE AND NON EXECUTIVE
DIRECTORS” (Cont’d)
He can exercise an impartial influence and bring
to bear experience gained from other fields;
executive directors would therefore be well
advised to consider the appointment of such
directors to serve alongside them.
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POWERS OF DIRECTORS
Directors derive their power from the
Articles
of
Association
and
the
Memorandum of Association.
Directors must exercise their powers
collectively and majority decisions will
prevail.
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DUTIES OF DIRECTORS
The duties of directors are owed to the company as a
whole. Their duties and responsibilities arise both out
of common law and out of statute and can be
classified as follows:Fiduciary duty to act honestly and in good faith;
Duty to exercise skill and care; and
Statutory duty
Directors should bear in mind that breach of these
duties may result in their being judged unfit to be
concerned in the management of a company and lead
to their disqualification as directors.
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FIDUCIARY DUTY
Four separate rules have emerged:i) Directors must act in good faith in what they
believe to be the best interests of the company.
Generally speaking, the interests of the company
are to be equated with the interests of its members
as a whole. As between different groups of
shareholders, the directors must act fairly.
ii) Directors must exercise their power only for the
purpose for which they were granted.
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FIDUCIARY DUTY (Cont’d)
iii) Directors must not place themselves in a
position in which there is a conflict between their
duties to the company and the personal interest or
duties to others.
iv) Directors must not fetter their discretion by
agreeing, either with one another or with third
parties, how to vote at future board meetings.
However, that does not prevent them from
committing the company to a contract which
requires further action at subsequent board
meetings.
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DUTY OF SKILL AND CARE
Responsibilities of directors include taking reasonable
steps to ensure that the company’s assets are properly
collected, safeguarded, insured and invested, and that
all payments are supported by proper documentation.
Directors are required in the performance of their
duties:To exhibit such a degree of skill as may reasonably
be expected from a person with their knowledge and
experience, and
To take such care as an ordinary person might be
expected to take on their own behalf.
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DUTY OF SKILL AND CARE
In applying these standards no distinction is to be drawn between
executive and non executive directors.
 Executive directors should devote their time and energy to
company matters in accordance with the terms of their contract.
In most cases this will require them to devote all their working
time.
 Non executive directors are not required to give continuous
attention to company affairs.
 However, they should familiarise themselves with the company’s
affairs including its financial position and should attend
meetings of the board whenever they are reasonably able to do
so.
 Were a director, whether executive or non executive, has a
particular skill for example he is a qualified accountant, he
should exhibit the skill or ability reasonably expected from a
person in that profession.
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STATUTORY DUTY
Company law imposes a number of duties on
directors for example the preparation of the
Annual Financial Statements.
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DUTY TO EMPLOYEES
As an employer the company must comply with
the requirements of employment law. The
directors, being in charge of the management of
the company’s affairs, should have this in mind
when dealing with employment matters.
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DUTIES IN RELATION TO
AUDITORS
With the exception of companies exempt from audit, it
is the duty of the company in general meeting to
appoint auditors for each financial year. Auditors of a
private company are deemed to be reappointed each
year if an elective resolution not to reappoint auditors
annually is in force.
Auditors have a statutory right of access at all times to
the company’s books, the accounts and vouchers and to
require from the officers and from the company such
information as is necessary for the performance of their
duties. Directors must therefore ensure that the
auditors have adequate information for the performance
of their duties.
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EQUAL STANDARDS OF CARE
A board of directors acts as a whole and although
some of its members may be given additional
powers by the articles or by resolution, the general
duties and responsibilities are the same for each
director. There is no distinction between the
position of executive and non executive directors.
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CURRENT CULTURE
Due to instances of fraud and CEOs making
decisions based on private benefits, there has been
a push for more independent directors to fill the
boards of companies. It is believed that if a
director is independent, he will not have any
conflicts of interest that may interfere with an
oversight role.
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COMPENSATION
• Director compensation
typically is a
combination of cash
and stocks. Proponents
of increased stock
compensation believe
that directors are more
likely to act in the best
interests of
stakeholders if
compensation is
directly related to the
firm’s stock price.
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ROLE OF BOARD AND MANAGEMENT
The Board of Directors, which is elected by the
stockholders, is the ultimate decision-making body of
the Company except with respect to those matters
reserved to the stockholders.
It selects the senior management team, which is
charged with the conduct of the Company’s business.
Having selected the senior management team, the
Board acts as an advisor and counselor to senior
management
and
ultimately
monitors
its
performance.
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ROLE OF BOARD AND MANAGEMENT
(Cont’d)
The fundamental role of the directors is to
exercise their business judgment to act in what
they reasonably believe to be the best interests
of the Company and its stockholders.
In fulfilling that responsibility the directors
may reasonably rely on the honesty and
integrity of the company’s senior management
and expert legal, accounting, financial and
other advisors.
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BOARD MEMBER ORIENTATION
AND EDUCATION
The Nominating and Corporate Governance Committee
shall develop and maintain an orientation program for new
directors that shall include meetings with senior
management and visits to the Company’s facilities.
Incumbent directors shall also be invited to attend the
orientation program.
In addition, the directors are encouraged to attend at least
once every two years an “ IS S approved ” director
education pro gr a m relating to Board responsibilities,
corporate governance, or substantive matters relating to
the particular Committee upon which such director serves.
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BOARD MEMBER ORIENTATION
AND EDUCATION (CONT’D)
The Company will reimburse reasonable costs and
fees incurred by its directors in attending any
program authorized by the Nominating and
Governance Committee in advance and in
accordance with this policy.
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BOARD EVALUATION
The Board and each committee will perform an
annual self-evaluation. Each April the directors
will be requested to provide their assessments of
the effectiveness of the Board and the committees
on which they serve to the Nominating and
Corporate Governance Committee.
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BOARD EVALUATION (CONT’D)
The individual assessments promptly will be
reported for discussion to the full Board and the
committees. The Nominating and Corporate
Governance Committee should also report its
assessment of the Board’ s compliance with these
principles set forth in these guidelines as well as
identification of areas in which the Board or
committees could improve performance.
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FIDUCIARY DUTIES OF
DIRECTORS AND OFFICERS
The business judgment rule is a judicially developed
doctrine that recognizes that directors and officers
generally are best situated to make difficult decisions
that affect the rights of stockholders, and provides
strong deference to the integrity of those decisions in
the face of claims of malfeasance or negligence.
The business judgment rule is a critical component of
corporate jurisprudence that is designed to assist
companies in attracting talented directors and officers
to operate the corporation by limiting the circumstances
in which those persons can be liable for the
corporation’s activities.
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FIDUCIARY DUTIES OF
DIRECTORS AND OFFICERS (Cont’d)
Directors’ fiduciary duties are generally described
as consisting of two separate duties
the duty of care and
the duty of loyalty
However, some commentators also consider the
duty of good faith and fair dealing to be a separate
duty.
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DUTY OF CARE
The duty of care requires directors and officers to
act prudently in light of all reasonably available
information in overseeing the corporation’s
business and making decisions on its behalf.
Specifically, directors and officers should employ
the following practices, among others, to the
extent appropriate:
Obtain and consider all relevant information;
Take time to evaluate corporate actions;
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DUTY OF CARE (Cont’d)
Consider the advice of experts;
Ask questions and test and probe assumptions;
Understand the terms of transactions;
Make deliberate decisions after candid
discussion;
 Understand
the
corporation’s
financial
statements and monitor related controls;
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DUTY OF CARE (Cont’d)
Review and monitor the performance of the
chief executive and other senior officers;
Remain informed about the corporation’s
operations, performance and challenges; and
Implement and monitor reporting and
information systems to check for failures to
comply with laws and regulations.
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DUTIES OF LOYALTY
AND GOOD FAITH
The Duty of Loyalty
Directors owe a fiduciary duty of loyalty to the
corporation and to its stockholders. The duty of
loyalty requires directors and officers to act in
good faith, to act in the best interests of the
corporation and its stockholders, and to refrain
from receiving improper personal benefits as a
result of their relationship with the corporation.
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THE DUTY OF LOYALTY (Cont’d)
The duty of loyalty prohibits self-dealing and
usurpation of corporate opportunities by directors
without the informed consent of the corporation,
through either its disinterested directors or
stockholders.
“Essentially the duty of loyalty mandates that the best
interest of the corporation and its shareholders takes
precedence over any interest possessed by a director,
officer or controlling shareholder and not shared by
the shareholders generally”
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THE DUTY OF LOYALTY (Cont’d)
Duty of loyalty issues typically arise in various contexts,
including:
A conflict of interest – where any director or officer has an
interest in a transaction contemplated by the corporation;
Misappropriation of corporate opportunities – where a
director or officer exploits an opportunity that should
have been made available to the corporation;
Competition with the corporation – where the director or
officer is competing with the corporation without the
express informed consent of the disinterested directors or
stockholders;
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THE DUTY OF LOYALTY (Cont’d)
Misappropriation of corporate assets – where
corporate assets or information are used by an
officer or director for non-corporate purposes;
and
Egregious conduct – conduct that is deemed to
be sufficiently egregious to be viewed as not
having been taken in good faith, including
completely
abdicating
the
director’s
responsibilities to the corporation.
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THE DUTY OF LOYALTY (Cont’d)
Note that, unlike the duty of care, liability for
breaches of the duty of loyalty cannot be limited
by the corporation’s certificate of incorporation,
and directors and officers may not have access to
contractual indemnification for breaches of the
duty of loyalty that involve bad faith.
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WHAT DEFINES A
“CONFLICT OF INTEREST”?
A director is “interested” in a particular transaction or
corporate decision when his or her exercise of judgment
with respect to such transaction or corporate decision is
compromised by the presence of one or more external
factors relating to the transaction.
Such “interests” most commonly exist when a director
has a material economic interest in a particular
transaction or decision, such as when a director has a
financial stake in another party with which the
corporation is seeking to do business, when a director
stands to receive a financial payment arising
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WHAT DEFINES A
“CONFLICT OF INTEREST”?(Cont’d)
out of a transaction (such as a finder’s fee) or
where a director or officer stands to benefit from a
continuing relationship with the other party to a
transaction (such as an employment relationship
following the transaction).
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MITIGATING DUTY OF
LOYALTY ISSUES
Duty of loyalty issues can be mitigated if actions
involving potential conflicts are approved by an
independent decision-making body, which serves
to mitigate the risk that the decision in question is
motivated by an improper purpose. The
independent decision-making body can be a
majority of disinterested directors (even if less
than a quorum) or a majority of the stockholders.
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THE BOARD OF DIRECTORS –
ROLES AND RESPONSIBILITIES
The board's key purpose is to ensure the
company's prosperity by collectively directing the
company's affairs, whilst meeting the appropriate
interests of its shareholders and stakeholders.
The objects of the company are defined in the
Memorandum of Association and regulations are
laid out in the Articles of Association.
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ROLE OF THE BOARD OF
DIRECTORS
Boards can be helped greatly by focusing on four key
areas:
Establish vision, mission and values
Determine the company's vision and mission to guide
and set the pace for its current operations and future
development.
 Determine the values to be promoted throughout the
company.
 Determine and review company goals.
Determine company policies
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ROLE OF THE BOARD OF
DIRECTORS (Cont’d)
Set strategy and structure
 Review and evaluate present and future opportunities,
threats and risks in the external environment and current
and future strengths, weaknesses and risks relating to the
company.
Determine strategic options, select those to be pursued, and
decide the means to implement and support them.
Determine the business strategies and plans that underpin
the corporate strategy.
Ensure that the company's organisational structure and
capability are appropriate for implementing the chosen
strategies.
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ROLE OF THE BOARD OF
DIRECTORS (Cont’d)
Delegate to management
 Delegate authority to management, and monitor
and evaluate the implementation of policies,
strategies and business plans.
Determine monitoring criteria to be used by the
board.
 Ensure that internal controls are effective
Communicate with senior management.
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ROLE OF THE BOARD OF
DIRECTORS (Cont’d)
Exercise accountability to shareholders and be
responsible to relevant stakeholders
Ensure that communications both to and from shareholders
and relevant stakeholders are effective.
Understand and take into account the interests of
shareholders and relevant stakeholders.
Monitor relations with shareholders and relevant
stakeholders by gathering and evaluation of appropriate
information.
Promote the goodwill and support of shareholders and
relevant stakeholders.
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RESPONSIBILITIES OF
DIRECTORS
Directors look after the affairs of the company, and are in
a position of trust. They might abuse their position in
order to profit at the expense of their company, and,
therefore, at the expense of the shareholders of the
company.
Consequently, the law imposes a number of duties,
burdens and responsibilities upon directors, to prevent
abuse.
Much of company law can be seen as a balance between
allowing directors to manage the company's business so
as to make a profit, and preventing them from abusing
this freedom.
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RESPONSIBILITIES OF
DIRECTORS (Cont’d)
Directors are responsible for ensuring that proper
books of account are kept. In some circumstances, a
director can be required to help pay the debts of his
company, even though it is a separate legal person.
For example, directors of a company who try to
'trade out of difficulty' and fail may be found guilty
of 'wrongful trading' and can be made personally
liable. Directors are particularly vulnerable if they
have acted in a way which benefits themselves.
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RESPONSIBILITIES OF
DIRECTORS (Cont’d)
• The directors must always exercise their powers for
a 'proper purpose' – that is, in furtherance of the
reason for which they were given those powers by
the shareholders.
• Directors must act in good faith in what they
honestly believe to be the best interests of the
company, and not for any collateral purpose. This
means that, particularly in the event of a conflict of
interest between the company's interests and their
own, the directors must always favour the company.
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RESPONSIBILITIES OF
DIRECTORS (Cont’d)
• Directors must act with due skill and
care.
• Directors must consider the interests
of employees of the company.
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CALLING A DIRECTORS'
MEETING
A director, or the secretary at the request of a
director, may call a directors' meeting.
A secretary may not call a meeting unless requested
to do so by a director or the directors.
Each director must be given reasonable notice of the
meeting, stating its date, time and place.
Commonly, seven days is given but what is
'reasonable' depends in the last resort on the
circumstances
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NON-EXECUTIVE DIRECTORS
Legally speaking, there is no distinction between an
executive and non-executive director. Yet there is
inescapably a sense that the non-executive's role can
be seen as balancing that of the executive director, so
as to ensure the board as a whole functions
effectively.
Where the executive director has an intimate
knowledge of the company, the non-executive
director may be expected to have a wider perspective
of the world at large.
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NON-EXECUTIVE DIRECTORS
(Cont’d)
As a first point we would note that the great majority
of private limited companies in the UK have not in the
past appointed non-executive directors to their
boards. In the main this was only relevant for publicly
quoted companies and much larger private companies
where, perhaps, there were very good reasons to make
such appointments.
This may have been to represent a finance house or a
powerful minority shareholder. However, over the last
few years we have seen an increasing trend for
medium size and larger private companies to appoint
non-executive directors.
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THE ROLE OF NON-EXECUTIVE
DIRECTORS
Essentially the role of a non-executive director is to
provide what could be called a “creative contribution”
to the board of directors by giving objective criticism
and advice. Today it is widely accepted that nonexecutive directors have an important contribution to
make to the effective running of many companies.
As “The Cadbury Report”, produced in 1992, stated
“they should bring an independent judgment to bear
on issues of strategy, performance and resources
including key appointments and standards of
conduct”.
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THE ROLE OF NON-EXECUTIVE
DIRECTORS (Cont’d)
There is no legal distinction between executive and
non-executive directors. As a result, in the UK unitary
board structure, non-executive directors essentially
have the same legal duties, responsibilities and
potential liabilities as their executive colleagues.
Although it is understood non-executive directors
cannot and do not give the same continuous attention
to the business of the company, it is important that
they show the same commitment to its success as the
executive directors.
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THE ROLE OF NON-EXECUTIVE
DIRECTORS (Cont’d)
All directors should be capable of seeing company
and business issues in a broad perspective.
However non-executive directors are generally
chosen because they have a breadth of experience,
are of an appropriate calibre and have particular
personal qualities.
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THE ROLE OF NON-EXECUTIVE
DIRECTORS (Cont’d)
Non-executive directors may have an inherent conflict
if it is the intention of the majority or sole shareholder
that they represent their or its interests. In such a case
they may be unable to carry out one of their primary
functions – to promote the success of the subsidiary
company.
If this in any way conflicts with their duties to their
own parent company then they would have to
consider their position. This is often going to be a
practical problem, particularly because of the new
requirements of the Companies Act 2006.
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THE FUNCTIONS OF NON-EXECUTIVE
DIRECTORS
Non-executive directors are expected to focus on board
matters and not “stray into executive directions”. In so
doing they should provide an independent view of the
company, distinct from its day-to-day operations. Nonexecutive directors therefore are appointed to bring to
the board:
(a) Independence
(b) Impartiality
(c) wide experience
(d) specialist knowledge
(e) personal qualities.
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KEY RESPONSIBILITIES OF NONEXECUTIVE DIRECTORS
Non-executive directors should be used to provide
general guidance and a different perspective on matters
of concern.
The board (or the chairman) will often seek their
guidance on particular issues before they are raised at
formal board meetings.
Indeed in listed companies some of the main specialist
roles of non-executive directors will be carried out in
board sub-committees, in particular, audit or
remuneration committees.
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STRATEGIC DIRECTION
As an “outsider”, the non-executive director may
have a more objective view of external factors
affecting the company in its business environment
than the executives.
The normal role of the non-executive director in
strategy formation is therefore to provide a
creative and informed contribution and to act as a
constructive critic in looking at the objectives and
plans devised by the management team.
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MONITORING
Non-executive directors should take responsibility for
monitoring the performance of executive management
especially with regard to the progress being made
towards achieving agreed company strategy and
objectives. They may also act as a sounding board for
management.
Rather like their audit function (see below) it is up to
the non-executives to probe continually and ask
questions of management, especially where they have
particular concerns.
They must continually act as a sounding board for
management, and as we have said, probe and ask
questions where they have any doubts or concerns.
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2015
MONITORING (Cont’d)
To fulfill this function effectively they must be fully
briefed by executives and have adequate sight of any
information or documents which they request.
It is not appropriate for management to use delaying
or other tactics such that the non-executives only
receive, for example, board papers at the last minute
giving them no time to consider these in detail.
This may of course lead to conflict between executives
and non-executives but this is something which has to
be dealt with in any company structure. Board and
other briefing papers should be full and complete – if
they are not, the non-executives should query the
point accordingly.
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2015
AUDIT
It is the duty of the board as a whole to ensure that
the company accounts properly to its shareholders
by presenting a true and fair reflection of its
actions and financial performance and that the
necessary internal controls and systems are put
into place and monitored regularly and rigorously.
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A non-executive director has an important part to
place in fulfilling this responsibility, whether or not a
formal audit committee has been constituted.
As previously mentioned, it is essential the nonexecutive directors ask appropriate questions when
they have any doubts or concerns as to actions or
financial positions or structures being taken or
organised by the management.
They must satisfy themselves that the financial
information produced is accurate and that financial
controls and systems of risk management are both
robust and defensible.
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THE CHAIRMAN OF THE BOARD
The articles usually provide for the election of a
chairman of the board.
They empower the
directors to appoint one of their own number as
chairman and to determine the period for which
he is to hold office.
If no chairman is elected, or the elected chairman
is not present within five minutes of the time fixed
for the meeting or is unwilling to preside, those
directors in attendance may usually elect one of
their number as chairman of the meeting.
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2015
THE CHAIRMAN OF THE BOARD
(Cont’d)
The chairman will usually have a second of casting
vote in the case of equality of votes. Unless the
articles confer such a vote upon him, however, a
chairman has no casting vote merely by virtue of his
office.
Since the chairman's position is of great importance, it
is vital that his election is clearly in accordance with
any special procedure laid down by the articles and
that it is unambiguously minuted; this is especially
important to avoid disputes as to his period in office.
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2015
THE CHAIRMAN OF THE BOARD
(Cont’d)
Usually there is no special procedure for
resignation. As for removal, articles usually
empower the board to remove the chairman from
office at any time. Proper and clear minutes are
important in order to avoid disputes.
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ROLE OF THE CHAIRMAN
The chairman's role includes managing the board's
business and acting as its facilitator and guide. This
can include:
Determining board composition and organisation;
Clarifying board and management responsibilities;
Planning and managing board and board committee
meetings;
Developing the effectiveness of the board.
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SHADOW DIRECTORS
In many circumstances, the law applies not only to
a director, but to a 'shadow director'. A shadow
director is a person in accordance with whose
directions or instructions the directors of a
company are accustomed to act.
Under this definition, it is possible that a director,
or the whole board, of a holding company, and the
holding company itself, could be treated as a
shadow director of a subsidiary.
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SHADOW DIRECTORS (Cont’d)
Professional advisers giving advice in their
professional capacity are specifically excluded
from the definition of a shadow director in the
companies legislation.
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FINAL WORDS OF WISDOM
People often question whether corporate boards
matter because their day-today impact is difficult
to observe. But, when things go wrong, they can
become the center of attention.
Understanding the role of boards is vital both for
our understanding of corporate behavior and with
respect to setting policy to regulate corporate
activities.
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THANK
YOU
Tuesday, July 21, 2015
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Tuesday, July 21,
2015
THANK YOU
THE END
THANK YOU
Prof.
Kwame Boasiako
Omane-Antwi
87
Prof. K. B. Omane-Antwi
Tuesday, July 21,
2015
PhD, MBA, MA, ITP (HARVARD)
AMP(OXON),FCCA, FRSA(UK),
FBI(Hon), FIOD(UK), FIOD(GH),
FCIM, MCIPD, MIMIS
Professor of Accounting &
Vice Rector
Pentecost University
College
Sowutuom
Tel 0244-32448/0202011775
E-mail:
[email protected]
[email protected]
FACILITATOR
KWAME BOASIAKO OMANE –
ANTWI