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Which are the principles of good corporate governance?

      

Which are the principles of good corporate governance?

  

Answers


Wilfred
There are a number of principles essential for good corporate governance practices. The following
have been identified as representative of critical foundations and virtues of good corporate
governance practices.
a. Directors
Every company should be headed by an effective board of directors to offer strategic guidance,
lead and control the company and be accountable to shareholders.
The board of directors should discharge the following responsibilities regarding corporate
governance.
• Define company mission, strategy, goals ad objectives.
• Oversee the corporate management and operations, review management accounts, approve
the company expenditures and review the performance of the organization.
• Review on a regular basis the adequacy ad integrity of the company’s accounting and
internal control system including compliance with applicable laws and regulations.
• Establish relevant committees and delegate mandates to run the affairs of the company. In
addition, it should establish an audit committee.

b. Director’s remuneration.
This should be sufficient to attract and retain directors to run the company efficiently and it should
be approved by the shareholders. The executive director’s remuneration should be competitive
and linked to performance.

c. Board balance.
The board should be composed of a balance of diverse skill and expertise in order to ensure that
no individual or group of individuals can dominate the board’s decision making process.
For listed companies, the board should have at least a third of independent non executive
directors. An independent director is one who:
• Has not been employed by the company in an executive positioning in the last five years.
• Is not associated with any advisor or consultant of the company or member of the company’s
senior management or a significant customer or supplier of the company.
• Has no personal service contract with the company or a member of the company’s senior
management.
• He is not employed by a public limited company in which an executive officer of the company
serves as a director.
• He is not a member of the immediate family of any person named above.
• Has not had any of the relationships described above with any affiliate of the company.

d. Appointments to the board.
There should be a formal and transparent procedure in appointment of directors to the board. All
persons offering themselves for appointment as directors should disclose any potential areas of
conflict that may undermine their position in service as directors.

e. Re-election of directors.
All directors except the managing director should be required to submit themselves for re-election
at regular intervals or at least every three years. Executive directors should have a fixed service
contract not exceeding five years with a provision for renewal subject to regular performance
approval by the shareholders.

f. Role of the chairman and the chief executive.
There should be a clear separation of roles and responsibilities of the chairman and the chief
executive. This should ensure a balance of power and authority and provide checks and balances
such that no individual should have unquestionable powers over decision making.

g. Approval of major decisions by shareholders.
The shareholders should participate in major decisions of the company. The board should
therefore provide shareholders with information such as major disposal of company assets, plant
restructuring, mergers and acquisitions and organization plans.

h. Best practices in audit committees
An audit committee is an independent committee established by the board and mainly composed
of at least three non executive independent directors with written terms of reference which deal
clearly with its authority and duties.
Wilfykil answered the question on April 11, 2019 at 09:38


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