The Board’s role is to:
- provide entrepreneurial leadership, and set strategic objectives, which should include appropriate focus on value creation, innovation and sustainability;
- ensure that the necessary resources are in place for the company to meet its strategic objectives;
- establish and maintain a sound risk management framework to effectively monitor and manage risks, and to achieve an appropriate balance between risks and company performance;
- constructively challenge Management and review its performance;
- instil an ethical corporate culture and ensure that the company’s values, standards, policies and practices are consistent with the culture; and
- ensure transparency and accountability to key stakeholder groups.
Scope of Director Duties
Directors should be aware of their duties at law, which includes acting in good faith and the best interests of the company; exercising due care, skills and diligence; and avoiding conflicts of interest. Directors should also put in place policies, structures and mechanisms to ensure compliance with legislative and regulatory requirements, establish appropriate tone-at-the-top, desired organisational culture and standards of ethical behaviour.
While the duties imposed by law are the same for all directors, a listed Board will generally have different classes of directors (executive, non-executive and independent directors) with different roles:
- Executive Directors (EDs) are usually members of senior management, and involved in the day-to-day running of the business. Executive directors are expected to:
- Non-Executive Directors (NEDs) are not part of Management. They are not employees of the company and do not participate in the company’s day-to-day management. NEDs are expected to:
- Independent Directors (IDs) are NEDs who are deemed independent by the Board (see Provision 2.1 and Practice Guidance 2 on criteria for director independence). IDs have the duties of the NEDs, and additionally provide an independent and objective check on Management. In certain cases, the SGX Listing Rules require IDs to make certain decisions and determinations. However, IDs should avoid focusing solely on the duties relating to compliance with rules. As with all directors, they are to act in the best interests of the company as a whole and not of any particular group of shareholders or stakeholders.
Conflicts of Interest
The Board should have clear policies and procedures for dealing with conflicts of interest. Where the director faces a conflict of interest, he or she should disclose this and recuse himself or herself from meetings and decisions involving the issue. For instance, if the Chairman of the Board (Chairman) is a member of the Nominating Committee (NC), he or she may face a conflict of interest on discussions relating to the succession of the Chairman and should thus recuse himself or herself from such discussions after providing his or her input to the NC on other matters.
There should be formal communication from the company to each of the directors on their appointment and their roles, duties, obligations and responsibilities, and the expectations of the company. This includes each director developing his or her competencies to effectively discharge his or her duties.
To ensure that directors have the opportunities to develop their skills and knowledge, the Board should develop a policy and criteria for directors’ development. The Chairman and the NC Chairman should jointly and regularly review and agree with each director his or her training and professional development needs.
Board Organisation and Support
The Board may form board committees, and decide the scope and the matters delegated to the board committees. Generally, all important decisions should be made at the Board level.
If the Board chooses to form an executive committee (EXCO) and delegate certain matters for the EXCO to decide, it is responsible for understanding the EXCO’s discussions and endorsing the EXCO’s decisions.
Management provides the Board with information for its meetings and decision making, including board papers and supporting information. In respect of budgets, any material variance between the projections and actual results should also be disclosed and explained.
Relying purely on what is volunteered by Management is unlikely to be enough in all circumstances and further enquiries may be required if the director is to fulfil his or her duties properly. Directors are entitled to request from Management and should be provided with such additional information as needed to make informed decisions. Management should provide the information in a timely manner.
The Board should be supported by the company secretary, whole role should be clearly defined. The company secretary's responsibilities include advising the Board on corporate and administrative matters, as well as facilitating orientation and assisting with professional development as required. The company secretary should attend all board meetings.