A. Explanation

This Provision describes the nature of the information required by the Board to make informed decisions, and how such information is transmitted.

The Board can only make good decisions if it is properly informed. To this end, the information it requires should be:

• Complete and comprehensive, and not be partial.
• Adequate and relevant for the decision to be made.
• Given in a timely manner.

The Provision recognises, and deals with, the asymmetry of information between management and directors, in particular, the Non-Executive Directors (NEDs). It thus states that management is to provide requisite information to the Board at its Board meetings, as well as on an ongoing basis.

At Board meetings, formal Board papers with supporting information are typically provided. In respect of budgets, any material variance between projections and actual results should also be disclosed and explained.

Practice Guidance 1 suggests that relying purely on what is volunteered by management is unlikely to be enough in all circumstances as management may unwittingly or deliberately withhold key information. Thus, further enquiries may be required if a particular director is to fulfil his duties properly. Directors are entitled to request from management such additional information as is needed to make informed decisions, and management should provide these in a timely manner.

B. Practice Guidance

• Practice Guidance 1: Board Roles and Director Duties.

C. Related Rules and Regulations

• Nil.

D. CG Guides

• Board Guide Appendix 6F: Board Control of Management [Board Relationships].

E. Related Articles

• “Back to basics: financial literacy for board members” by Barbara Voskamp. (446KB)
• “Achieving Quality Financial Statements” by Yeoh Oon Jin. (456KB)
• “The effective board” by Willie Cheng. (54KB)
• “The Board-Management Relationship: How to achieve control and support” by Professor Jean-Francois Manzoni. (434KB)