|Every company should be headed by an effective Board to lead and control the company. The Board is collectively responsible for the long-term success of the company. The Board works with Management to achieve this objective and Management remains accountable to the Board.|
This Principle describes the Board’s role in leading and controlling the company to ensure the company’s long-term success, and why it is important to do so effectively while working appropriately and effectively with management.
The Guidelines describe:
- The role of the Board in various areas (Guideline 1.1).
- The requirement of all directors to act in the interests of the company (Guideline 1.2).
- The delegation of authority to Board Committees (Guideline 1.3).
- The medium, frequency and disclosures of Board meetings (Guideline 1.4).
- The formalisation of matters that require the Board’s decision and approval (Guideline 1.5).
- The importance and type of training for directors (Guideline 1.6).
- The formalisation of director’s duties and obligations upon appointment (Guideline 1.7).
The Board's role is to:
- provide entrepreneurial leadership, set strategic objectives, and ensure that the necessary financial and human resources are in place for the company to meet its objectives;
- establish a framework of prudent and effective controls which enables risks to be assessed and managed, including safeguarding of shareholders' interests and the company's assets;
- review management performance;
- identify the key stakeholder groups and recognise that their perceptions affect the company's reputation;
- set the company's values and standards (including ethical standards), and ensure that obligations to shareholders and other stakeholders are understood and met; and
- consider sustainability issues, e.g. environmental and social factors, as part of its strategic formulation.
All directors must objectively discharge their duties and responsibilities at all times as fiduciaries in the interests of the company.
The Board may delegate the authority to make decisions to any board committee but without abdicating its responsibility. Any such delegation should be disclosed.
The Board should meet regularly and as warranted by particular circumstances, as deemed appropriate by the board members. Companies are encouraged to amend their Articles of Association (or other constitutive documents) to provide for telephonic and video-conference meetings. The number of meetings of the Board and board committees held in the year, as well as the attendance of every board member at these meetings, should be disclosed in the company's Annual Report.
Every company should prepare a document with guidelines setting forth:
- the matters reserved for the Board's decision; and
- clear directions to Management on matters that must be approved by the Board. The types of material transactions that require board approval under such guidelines should be disclosed in the company's Annual Report.
Incoming directors should receive comprehensive and tailored induction on joining the Board. This should include his duties as a director and how to discharge those duties, and an orientation program to ensure that they are familiar with the company's business and governance practices. The company should provide training for first-time director1 in areas such as accounting, legal and industry-specific knowledge as appropriate.
Upon appointment of each director, the company should provide a formal letter to the director, setting out the director's duties and obligations.