Global Board Evaluation Practices and Trends – adding value from the top down
Annual board effectiveness evaluations are a vital element in maintaining an effective and accountable board, with recent research by the Corporate Secretaries International Association Limited (CSIA) finding that the Corporate Secretary or Governance Professional is increasingly taking centre-stage, not only in convincing the board of the value of a thorough evaluation process, but in facilitating the evaluation and coordinating the remedial actions.
The CSIA’s recently concluded global research paper titled Global Board Evaluation Practices and Trends: Lessons for the Corporate Secretary, in collaboration with Diligent - a leading provider of communication and collaboration tools for boards and C-suite executives - focused specifically on the role of the Corporate Secretary or Governance Professional, which Zahra Cassim, CEO of CSIA, said was validated by the actual research: “Our focus on the Corporate Secretary was confirmed by the research as appropriate because of the number of evaluation processes where such an individual played a crucial role.”
The research concludes with five important take-home messages for Corporate Secretaries, that PwC partner Anton van Wyk says is incredibly valuable for the board looking to stay at the leading edge of effectiveness and governance. “In South Africa, for instance, King IV says in Principle 9 that the governing body should ensure that the evaluation of its own performance and that of its committees, its chair and its individual members, support continued improvement in its performance and effectiveness. The governance codes in most territories deal with this requirement of good governance.
“The person or entity responsible for the evaluation, in most cases the Corporate Secretary, will do well to benchmark their approach against global best practice and bring the lessons outlined in this research paper into practice. He or she needs the full buy-in of the board and the insights garnered from the CSIA paper will greatly assist in this cause.”
The research paper, which was conducted among senior respondents such as executive and nonexecutive directors, CEs and Corporate Secretaries in various countries, culminated in five important findings for governance professionals as they approach board evaluations.
“The first important finding is that the Corporate Secretary plays a critical role in the evaluations process,” said Cassim. “There are also lessons to take home in the growing trend of using digital technology to facilitate evaluations because of convenience and ease, but also increased security and access to anonymous data for benchmarking, as well as the need to produce formal reports. In addition to this, research indicates that complacency can kick in if the same process without meaningful remedial interventions is followed year after year.”
This leads to the very important, but perhaps most difficult, lesson for Corporate Secretaries in the CSIA report: the need to take responsibility and accountability for the coordination of remedial action and facilitating continuous performance discussions, be these quarterly in addition to, or as part of board meeting agendas. “This will make or break the effectiveness and meaningfulness of the evaluation process,” said Cassim.
The final message for Corporate Secretaries speaks to their efforts to encourage boards to do open and transparent reporting. “Although the research indicated that many companies are still only reporting very basic information, we are seeing more corporate governance codes requiring greater detail and additional transparent disclosure of board effectiveness evaluation processes and outcomes,” says the report. The research found that while some boards merely report that an evaluation took place, the Corporate Secretary should encourage more qualitative information to be shared, thus increasing accountability and good corporate governance.
Van Wyk said that a very positive sign emanating from the report was that most respondents to the CSIA survey saw board evaluations as real value-adding activities. “It is a very positive sign that respondents indicated that evaluations are taken seriously by the board,” he said.
“Probably the most important insight here for Corporate Secretaries is to convince their boards to keep pace with the leaders globally and not merely go through the motions but actually undergo a fastidious and rigorous process that ultimately benefits everyone from the top down.”
Read the full report here.
Watch the launch event here.
Prime Minister Narendra Modi with MoS Law and Justice & Corporate Affairs, PP Chaudhary and CS (Dr.) Shyam Agrawal, President, ICSI at the inauguration of ICSI Golden Jubilee Year Celebrations
Prime Minister, Narendra Modi addressed a large conglomeration of Company Secretaries , CS Students, professionals and other distinguished dignitaries while inaugurating the Golden Jubilee Year of the Institute of Company Secretaries of India(ICSI) at Vigyan Bhawan.
In his Inaugural address the Prime Minister , complimented The Institute of Company Secretaries of India (ICSI) for attaining institutional excellence and being a torch bearer for the cause of Good Corporate Governance for the last 50 years. The Prime Minister on this momentous occasion, urged the Institute and its stakeholders for selfless dedication towards attaining the Country’s vision of ‘New India’.
In his address, the PM said "I am happy that I am sitting with professionals with a specific qualification , who make sure that the companies of India follow the laws and regulations, do not mishandle the accounts, and are honest in their work." The Prime Minister also asserted that the way the CS professionals adhere to their responsibilities is how the 'corporate culture' in India is decided.
Focusing on the motto of ICS I“Satyam Vada, Dharmam Chara” i.e “Speak the Truth, Abide by Law”, Prime Minister Narendra Modi said, that "The suggestions given by Company Secretaries influence the nations' corporate governance framework , so the adherence to the motto in letter and spirit by all the professionals would become a boon for the country and give rise to well governed business boosting the economic sector , helping the nation towards ‘New India’.
Prime Minister applauded the Role of the Institute of Company Secretaries of India (ICSI) towards its major contribution in developing the Corporate Governance Framework and compliance mechanism for the corporate sector in the country.
On this historic occasion, Prime Minister launched ICSI Motto Song “Satyam Vada, Dharmam Chara”. The ICSI Motto Song has been written, composed and sung by renowned Lyricist, Composer and Singers - Shri Niranjan Iyengar, Shri Lalit Pandit, Shri Shaan and Shri Babul Supriyo respectively .
A Special Cover issued by Department of Posts reminiscing ICSI’s Golden Jubilee Year was also released by the Prime Minister.
Shri Arun Jaitley, Union Minister of Finance and Corporate Affairs congratulated the Institute on this Historic Moment through a video message.
Shri P.P Choudhary Minister of State for Law and Justice and Corporate Affairs, also addressed the august gathering and said, “Now is the time that Company Secretaries should optimally unleash their professional acumen, seize the various opportunities offered by the government, perform a dual role: firstly as a young and profound professional and secondly as a company law expert. A Company Secretary can immensely support the Government of India in realizing ‘Ease of doing Business’ drive for entrepreneurs and enterprising businesses contributing towards ‘NEW INDIA’. He appreciated the efforts of the Institute to come up with the ‘Model Governance Code for Meetings of Gram Panchayats.
CS (Dr.) Shyam Agrawal , President, the Institute of Company Secretaries of India, in his presidential address welcomed Prime Minister , Narendra Modi and Shri P.P Chaudhary on the Dais . CS(Dr.) Agrawal said that, , “It’s a great honour for ICSI and for the entire CS fraternity that PM Narendra Modi has graced this historic ocassion. Since its creation, ICSI has grown tremendously as the only recognized professional body in India and the largest in the world to develop and regulate the profession of Company Secretaries. Today it has over 52,000 members and over 4 lakh students on its rolls. The institution has been relentlessly working towards promoting good corporate governance practices.” President, ICSI also outlined major accomplishments and initiatives of the institute, with stress on improving corporate governance norms. The Institute has pioneered the conceptualisation of the ‘International Corporate Governance Code’ and is envisioning to play a lead role in corporate governance. “I am pleased to state that the secretarial standards issued by ICSI have now been adopted by the Malaysian Association of Company Secretaries (MACS) as a benchmark in development of their secretarial standards.” The President , ICSI added.
During the event, President, ICSI, welcomed the Hon’ble Prime Minister with a Khadi Angvastram and First Certificate marking the commencement of ‘ ICSI - Shaheed Ki Beti’ initiative. The initiative aims to fund the education of the daughters of our martyrs.
Various New Initiatives and publications of ICSI were also launched on the occasion :
1. Corporate Anti-Bribery Code : The Company Secretaries as Governance Professionals have a substantial role to play in establishing, promoting and sustaining the transparent and accountable governance in the country and extend their contribution to New India of 2022. Keeping this in mind, the Institute has come up with a well-researched “Corporate Anti-Bribery Code”. This Code is to be adopted voluntarily by the Corporate. The code would supplement the government’s initiative towards building a corruption free New India by 2022.
2. The Insolvency and Bankruptcy Code ,2016 – A Boon For Bankers.
3. Booklet on Insolvency - Insolvency and Bankruptcy Code, 2016:Resolving Insolvency (A Simplified Guide).
4. Financial Literacy campaign: The Institute is actively engaged in activities relating to Financial Literacy and Investor Education since 2005. The Institute is pleased to launch financial literacy campaign across India educating elected public representatives i.e Members of Rajya Sabha, Members of Lok Sabha, Members of Legislative Assembly in every state, Municipal Committee Councilors and Sarpanches at Rural Levels.
5. Special edition on Golden Jubilee year of Institute’s monthly Journal: Chartered Secretary.
6. Model Governance Code for Meetings of Gram Panchayats: This Code seeks to prescribe a set of principles for convening and conducting Meetings of Gram Panchayats and matters related thereto.The principles enunciated in this Code for Meetings of the Gram Panchayats are equally applicable to meetings of Standing Committees, unless otherwise stated herein or otherwise stipulated by any other applicable laws, Guidelines, Rules or Regulations.
7. Misuse of Corporate Structure: Prevention & Remedies :This Publication has been prepared compiling the recent regulatory actions taken against corporate misfeasance with an intent to deliberate upon the finer nuances of this issue, the entailing consequences, the remedies, the global scenario and the ultimate takeaway of avoiding this route in whatsoever circumstances.
8. Vision New ICSI 2022 : The Vision Plan is in alignment with the Hon’able Prime Minister’s Vision of New India in 2022. The Vision Plan will create a New ICSI in 2022 which will meet the growing and changing expectations of the stakeholder specially the trade and industry.
The event also witnessed felicitation of renowned Company Secretaries as well as Past Presidents and Past Secretaries of ICSI for their distinguished contribution towards the profession and the Institute.
About The Institute of Company Secretaries of India, (ICSI): The Institute of Company Secretaries of India, (ICSI) is premier national professional body set up under an Act of Parliament, i.e., Company Secretaries Act, 1980, for the regulation and development of the profession of Company Secretaries in India. The Institute functions under the jurisdiction of Ministry of Corporate Affairs, Government of India. The Institute, being a pro-active body, focuses on top-quality education to students of Company Secretaries Course and best quality set standards for CS members. There are currently over 52,000 members and around 4 Lakh students.
It is with great pleasure and honour that I accepted my election as President of CSIA, which took place on 15 March at the CSIA Council meeting held in Johannesburg, South Africa. CSIA enters a new era in 2017 and I am extremely excited to work with the member countries and our valued stakeholders to continue to utilize our strengths to be bold and build CSIA’s future together.
I would like to take this opportunity to thank the Executive Committee of 2016 under the leadership of Rick Summers for their hard work and dedication to manage the CSIA to meet its objectives. Congratulations also to the newly elected Executive Committee; I look forward to working with you and the member countries and in combining our collective expertise and resources, I strongly believe that the outcomes will be constructive and fruitful for CSIA.
As we ring in the new era with all the exciting new developments, let me take a moment to reflect on the past achievements of CSIA.
CSIA had been incorporated 7 years ago in Geneva and officially launched on 23 March 2010 in Paris under the auspices of the IFC and OECD. Over the past 7 years CSIA has achieved the following milestones:
And most recently, appointment of Zahra Cassim as our CEO.
It is no small feat for this 7-year old Association to have achieved the above and we could not have done it without the generous support of our member countries and sponsors.
One of the most recent developments is the incorporation of the new home for CSIA in Hong Kong. My thanks to the previous Executive Committee and in particular, the Hong Kong team for their unstinting efforts and contribution in guiding and coordinating with KPMG (Geneva) to facilitate the liquidation process and the incorporation of CSIA in Hong Kong.
The Council meeting held in Johannesburg, South Africa was quite pivotal in deciding the strategic direction of the CSIA as Council members debated the importance of profiling CSIA in both regional and global arenas to promote the role of corporate secretaries and governance professionals.
One of the critical drivers of this process and one of the key priorities of CSIA is to increase membership, which includes bodies with a focus on promoting the profession of corporate secretaries and governance professionals. An extensive research project is being undertaken by Council members to identify organisations at a global level that are focused on promoting corporate secretaries and governance professionals. This project is expected to facilitate the recruitment of new members to the CSIA and to strengthen the organisation’s resource base and increase its global footprint.
A further critical project for CSIA in 2017 will be to seek recognition from the World Trade Organisation (WTO) for the creation of a new classification on the Trade in Services Business Classification. CSIA made a presentation before the Committee on Specific Commitments of the World Trade Organization (WTO) on June 25, 2012 in Geneva, Switzerland to include this new listing by the name of ‘CORPORATE GOVERNANCE, COMPLIANCE AND SECRETARIAL ADVISORY SERVICES’. This initiative will be pursued with renewed vigour and presentations are also planned to be made to the International Labour Organisation (ILO) in this regard. As recognition is a critical component for growth, we are also planning to lobby organisations such as the World Bank and the OECD to build partnerships for continuing growth.
I am also very excited about our new thought leadership initiative on board evaluation, as we take a slightly different approach in that we will first do some global research on board evaluation practices through a questionnaire distributed amongst and beyond our membership base. The research and some key recommendations, specifically on what governance professionals can do to assist in improving board evaluation and performance in general, will then be published.
I am looking forward to implementing the following key strategies for our 2017/18 period:
The vital role that corporate secretaries play in company leadership has evolved significantly in the past decade to keep pace with changing expectations and there can be little doubt that it is evolving beyond the administrative, and is increasingly becoming more strategic and compliance-focussed.
Our focus is to ensure that we promote the role of secretary as one of the most important in the company and to ensure the recognition of their role at a global level.
In closing I would like to thank all the member countries for their contributions to our E-magazine and for their continued support to grow the CSIA.
The CSIA annual general meeting was held on Thursday 27 and Friday 28 October 2016 at the Centara Hotel and the Stock Exchange of Thailand offices in Bangkok, hosted by the Corporate Secretary Club of the Thai Listed Companies Association (TLCA).
With delegates attending from Australia, Hong Kong,India, Kenya, Malaysia, Nigeria, Singapore, Southern Africa, United Kingdom and Zimbabwe, the meeting addressed matters of key importance to corporate secretarial professionals around the world.
CSIA member delegates were keen to air their opinions on all matters with the overriding goal to further build and develop CSIA to help achieve its objectives. The diversity of views was refreshing with members happy to share their own experiences from their diverse range of situations. From jurisdictions with long-established governance practices to those where the profession is relatively nascent – all views and comments were welcomed and appreciated.
A common theme for all attendees was the challenges and opportunities presented by continually evolving nature of
corporate governance legislation, practices and the corporate secretarial profession itself.
Such sharing of diverse opinions is one of the cornerstones for CSIA’s continued success and growth. Understanding of the different pressures faced within individual countries and the ability to learn from successes and failures of organisations in the same field allowed all members to benefit from other’s experiences and so help their own development.
The meeting took an overview of all matters pertinent to CSIA including the standard yearly progress reports, financial reviews and budgeting discussions. Key topics that generated the most lively debates centred around the CSIA’s future including:
• Membership sustainability and growth
• WTO and ILO representation and developments
• Enhancing the use of the Corporate Secretary’s Toolkit
• Strategic plan for the coming year and a look to longer-term future goals and initiatives
• How CSIA can help to improve governance leadership in a wider range of countries
• Thought leadership initiatives and development of good practise guides
• Enhancement of the CSIA website to provide users with more updated and useful content
The final topic under discussion related to the redomiciling of CSIA from Switzerland to Hong Kong scheduled for mid-2017. The timing of this change lead to a deferment of elections for new office bearers and an agreement to hold these during a meeting to be held in Johannesburg, South Africa in March.
All members left the meeting with substantial to-do lists and a reaffirmation to work together through CSIA to promote the best practices in Corporate Secretarial, corporate governance, and compliance services.
Rick Summers, the CSIA President, would like to extend his thanks on behalf of all CSIA attendees to Penri Suteerasarn and her team at TLCA for their arrangements in making this a wonderful visit to Bangkok. This thanks is especially heart-felt as the meeting was held at a time of great sadness and national mourning for the people of Thailand following the passing of King Bhumibol Adulyadej.
On the evening of Thursday 27 October 2016, CSIA members attended a dinner presentation hosted by the Thai Institute of Directors. During the event Carina Wessels presented the results and advice provided in the thought leadership paper “Ten Practical Guidelines to Improving Board Communication”.
Despite the heavy rain the evening was well received by over 90 attendees with particular praise reserved for the quality of the speakers and the usefulness of the information provided.
Thanks especially to Carina Wessels for representing CSIA, Siriporn Vaniyananda of the Thai IOD for arranging the event and Diligent Corporation for their support.
Photos from the event can be found HERE.
The Corporate Secretaries International Association (CSIA), the only organisation representing the corporate point of view on global corporate governance issues, today launched “Ten Practical Guidelines to Improving Board Communication”.
Ensuring effective board communication has always been a critical aspect of the corporate secretary’s role. In the face of new and ever-increasing liability for directors and the incorporation of the business judgment rule in many jurisdictions has brought this duty more to the fore than ever.
CSIA’s new paper provides useful and practical advice for corporate secretaries to balance the imperatives of management and the board to improve the quality of discussions and the decision making process.
The paper was launched at the ICSA London office in conjunction with a webinar co-hosted by Diligent Corporation, sponsors of the paper and chaired by Carina Wessels, Past President of CSIA. Joining Carina on the panel was Charlie Horrell, Managing Director of Europe, Middle East and Africa Region at Diligent Corporation and Meena Heath, Global Ambassador, Global Leaders in Law who fielded incisive questions submitted by the 200-plus attendees.
“This paper is intended to challenge corporate secretaries on the manner in which they approach their accountability for sourcing information…and to provide practical tips to ensure the material presented to the board for decision-making are timely, accurate and effective.” said Ms Wessels.
Mr Horrell noted “As the leading provider of communication and collaborative tools for boards and C-suite executives, Diligent is proud to sponsor the launch of CSIA’s ‘Ten Practical Guidelines to Improving Board Communication’ paper.”
The full thought leadership paper and video of the launch event including the Q&A session can be accessed via www.csiaorg.com.
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About the Corporate Secretaries International Association (CSIA)
The CSIA is an international, not-for-profit federation of professional bodies that promote best practice in corporate secretarial, corporate governance, and compliance services.
It is the international federation of national bodies of corporate secretaries and governance professionals and represents those who work as frontline practitioners of governance throughout the world. It is recognized by the OECD as the global voice of this industry and its representatives sit on OECD corporate governance roundtables. For more information, visit www.csiaorg.com
About Diligent Corporation
Diligent is the leading provider of secure corporate governance and collaboration solutions for boards and senior executives. Over 3,500 clients in more than 60 countries rely on Diligent to provide secure, intuitive access to their most time-sensitive and confidential information, ultimately helping them make better decisions.
Diligent Boards secure board portal speeds and simplifies how meeting materials are produced, delivered and reviewed. The service provides directors and management with immediate access to time sensitive and confidential information online and offline, along with the tools to review, discuss and vote. Work flow features get board materials out more efficiently and serves to free up internal administration and IT resources, using the Diligent Boards portal, corporate executives can streamline board communications and discussions, helping to improve the quality of leadership decisions.
Used by over 35% of the Fortune 1000, Diligent has set the standard for providing the most useful product and responsive service so the world’s boards and leaders can communicate and collaborate securely. For more information, visit http://diligent.com/
CSIA is delighted to announce the appointment of a new part-time CEO, Zahra Cassim, who is based in South Africa.
Zahra has been employed in the professional body sector since 1999, when she joined the Institute for Public Finance and Auditing (IPFA) as the Professional Development Director. At IPFA she spearheaded the growth of the Institute’s qualifications with stakeholders in the South African government as well as international stakeholders such as the World Bank. In 2005 she was appointed Chief Executive Officer of the Institute.
Zahra was appointed Head of CIMA South Africa on 2 July 2012 and during her tenure at CIMA, student numbers and market share grew substantially as well as the recognition of management accounting amongst stakeholders in the corporate, government and tertiary sectors of the South African market. In addition to driving the long term country strategy for South Africa, Zahra was also responsible for overseeing growth in Botswana and Namibia and aligning the country growth targets at both regional and international level. Zahra has had experience of promoting the King Code of governance in South Africa.
In her role as CEO of CSIA, Zahra is responsible for coordinating the execution of the strategic goals and plans of the CSIA and driving both growth and strategy across the globe. Her role will be instrumental in ensuring that the unique skills set of corporate secretaries and governance professionals across the world are showcased.
Zahra brings a wealth of knowledge in strategy and business management and an understanding of the role of the professional body in developing people and promoting the recognition of specialist skills. She intends to apply her skills and experience to drive growth in the membership, recognition of the role of the corporate secretary and governance professional and better co-operation amongst the national associations of corporate secretaries.
Greetings to you all and may I take this opportunity to wish everbody a successful 2016.
I would also like to extend a warm welcome to the new representatives from our member countries and hope that you will enjoy being part of CSIA and that together, as a team, we can make a difference to the corporate world.
We can do this by ensuring that Corporate Secretaries are fully trained to handle the changes which are taking place in the world today, particularly with regard to Corporate Governance, Risk Compliance and Management. The articles in our Global Governance Voice magazine will continue to focus on this arena of competence.
I would also like to extend a warm welcome to Paul Davis, who is the Commercial Director of Ninehills Media Limited. In November 2015, CSIA and Ninehills entered into an Association Management Services Agreement. Paul has many years of experience in the B2B media industry in Hong Kong and across Asia, and with his expertise in digital media we are certain that we will communicate with our various stakeholders in a manner that not only elevates CSIA in the eyes of our current members and sponsors, but will hopefully attract other countries to become members and get additional sponsors on board.
However, as I have already mentioned, this can only happen if we all support this Association of ours. Contact with other country members will help us all to benefit from how and what they have done and are doing in their respective areas to promote our ideals. We cannot let this wealth of expertise go to waste.
CSIA is recognised by the Organisation for Economic Co-operation and Development as the Global voice of corporate secretaries and governance professionals, and are the only organisation representing the corporate point of view on global governance issues today. This is a level of excellence which we need to guard jealously.
In closing I would like to express my sincere thanks to the EXCO of 2015 for their dedication to the Association and welcome the 2016 EXCO members:
CSIA’s Council meeting took place in Johannesburg on 29 and 30 October 2015 and was combined with an Issuer Forum session on 29 October.
The Issuer Forum is a Computershare sponsored forum for South African issuers: it is a multi-disciplinary assembly for professionals to stay up-to-date with matters affecting company secretarial practice and for networking within corporate and public sectors.
The specific objectives of the forum are:
In the spirit of these objectives, it was regarded as an ideal opportunity of sharing international practices and trends with South African issuers through an experienced and extremely knowledgeable international panel discussion.
The panel discussion was facilitated by Carina Wessels (Past Chartered Secretaries Southern Africa and CSIA President) and consisted of:
A variety of topical issues were dealt with and a summary of some are included below:
The session concluded with a presentation by Etienne Nel on the anticipated introduction of a second exchange in South Africa.
All attendees had emphasised the wonderful learning and networking opportunity and thanked CSIA for the enlightening panel discussion.
A special word of thanks to our sponsor, Computershare, for not only making the Issuer Forum possible, but also sponsoring the first part of the CSIA Council meeting. Computershare has been a long-standing international sponsor and partner and CSIA looks forward to continuing a mutually beneficial relationship with them.
Photos from the forum can be found HERE.
CSSA held its 2015 Premier Corporate Governance Conference at the Wanderers Club, Johannesburg on 27 and 28 October 2015. A panel discussion on international corporate governance was held with participation from six member countries of CSIA. The panelists covered a wide range of issues, reflecting common trends in different jurisdictions as well as challenges specific to a jurisdiction.
Katherine Combs from the U.S.A. focused on whether Sarbanes Oxley (SOX) and subsequent legislation has been effective in reducing fraud and corruption. Harvard University undertook a review on SOX and concluded that the initial costs were high but 10 years later disclosure was more reliable and internal processes have improved. However, it did not prevent the 2008 financial crisis from occurring. Criticisms of SOX were that it did not provide for sufficient flexibility and was difficult to systematically measure the cost/benefits of increased regulation.
The Securities Exchange Commission established a disclosure effectiveness initiative. The recommendations included eliminating duplicate disclosures, eliminating “glossy” annual reports, unless an issuer desired them for marketing purposes and reflecting sustainability disclosures in a separate non-financial report.
The 2015-16 National Association of Corporate Directors (NACD) director survey results highlighted that 79% of boards have at least one female director and ethnic minorities remained unchanged at 52%. Other interesting findings included that 44% of shareholders said that directors met with institutional investors in the prior year and that directors wanted more director materials on effective risk management, cyber security, IT risks and technical strategies.
The subsequent promulgation of the Dodd Frank legislation did not address the primary cause of the 2008 crisis, being changes required to government housing policies and agencies. It did however result in significant increased compliance costs for companies.
Dr Nicholas Letting provided a broad overview of the corporate governance problems in East Africa and the responses to the challenges of corruption, weak regulatory enforcement, apathetic shareholders and board weaknesses. He highlighted the progress on corporate governance in Kenya from the time of publication of The Principles and Sample Code of Best Practice for Corporate Governance in the 1990s, to the requirement by The Capital Markets Authority since 2002 that all listed companies comply with principles of good corporate governance to the introduction of a new Companies Act in September 2015. The new Act has a strong emphasis on the role boards play and provides punitive sanctions for directors who do not exercise their oversight role with due diligence.
Corporate Governance was also strengthened by the establishment of a Centre for Corporate Governance in 2002, initiated mainly by the private sector. Its main focus was to review the effectiveness of controls and to promote transparency and accountability. A new Constitution enacted in 2010 has a key objective as the promotion of good governance through transparency, effective leadership and integrity. In April 2015, the Mwongozo Code of Governance was passed, which required every state corporation to appoint a company secretary, have nine board members with diverse skills who are required to undergo induction upon appointment and term limits of two terms, comprising three years each. There was also a strong emphasis on declarations of conflicts of interest.
It was interesting to note that the role of the corporate secretary was included in their Companies Act in 1989 as well as making the board responsible for ensuring a proper governance process was in place. There was a strong focus on the composition of the board, with the position of the chief executive officer and chairman being separate and prohibiting a concentration of a particular profession on a board.
Peter Turnbull from Australia commented that Australia was focusing on the practical aspects of the implementation of risk management. Regulators generally place risk management, risk appetite and associated oversight and the role of the board at the centre of corporate governance thinking.
A key challenge was to move from a “box ticking” approach on risk and governance, to risk management being an effective decision-making tool. The Corporations Act, the main legislation, was largely silent on risk.
Embedding risk management into the culture of a company was a challenge whereas a risk management framework was easy to design following guiding principles of simplicity and cost effectiveness. A proper culture underpins a good risk management framework. Culture needed to be underpinned by strong ethics and accountability. The Australian Securities and Investments Commission was focused on identifying a bad culture. However, in practice this was difficult to judge.
Risk management needed to be integrated with governance. Whilst the board was responsible for risk, in practice it delegated this responsibility to senior management. Accordingly, management and boards must be aligned and work closely together. A key element to ensuring the effectiveness of risk management was to embed risk management in the company culture and to link risk management objectives to KPIs. Key current risks concerning Australian companies were regulatory risk (too much intervention and cost), cyber security, third party risk, corruption, money laundering and reputation consequences following any of these incidences. Company secretaries were uniquely positioned to play a pivotal role in the risk management process.
Grace Tan from Singapore highlighted the benefits of a diverse board, which has become a more prominent issue since the 2008 financial crisis. McKinsey & Co in their annual “Woman Matter” studies concluded that there was a positive correlation between companies with more women on their boards and superior financial performance across all industries. Some of the benefits of having diversity in the boardroom included less “groupthink”, different perspectives considered, greater variety of potential solutions deliberated and better talent leverage. All these issues led to better decisions and better risk management. Institutional investors, particularly, reviewed gender, age, occupational background and ethnicity in the composition of boards.
In August 2014 a Diversity Action Committee was formed to build up the representation of women directors on boards of companies in Singapore. From a company perspective, the challenge was to make the changes at a pace that recognised and was sensitive to the cultural issues that have promoted male dominated boards. At the other end of the spectrum, too much emphasis on diversity could result in a board becoming dysfunctional.
Chua Siew Chuan from Malaysia advised that the 2012 Malaysian Code of Corporate Governance focused on the importance of independent directors. The Code required at least two or one-third of the board of directors to be independent directors. This was a challenge as most companies had promoters and grew from family-owned businesses. Directors were only classified as independent for a period of nine years. Thereafter, they could remain board members but were reclassified as non-executive directors. The board must justify and seek shareholders’ approval if it decided to retain an independent director, who has served on its board for more than nine years. The concern related to long tenure possibly impairing independence. The nine year cap applied to consecutive service or cumulative service of nine years with an interval. The nine year limit was adopted as it aligned with the tenure limit for independent non-executive directors in other jurisdictions. This cap was further supported by a study undertaken by INSEAD Business School on 2 000 companies, which concluded that the optimal average period for independent non-executive directors was 7 - 9 years. This resulted in independent non-executive directors being able to accumulate the benefits of company-specific knowledge without the cost of entrenchment. The Malaysia-Asean Corporate Governance Report findings for 2014 on 873 listed companies found that more than half of 873 listed companies have directors, who have served on those boards for over nine years.
Atul Mehta from India provided a high level overview of India’s Companies Act introduced in 2013. The focus of the Indian regulatory regime was to make it easy to do business in India, which has attained fifth place in the World Bank Doing Business 2015 index for emerging economies. The Indian Stock Exchange has the most listed companies in the world.
The new Act introduced two major changes impacting the company secretary profession, the first being the requirement for a secretarial audit for larger companies. This audit could only be performed by a practising company secretary, and the outcome of the audit must confirm that the relevant company has complied with all the laws of India. The second innovation was that the quorum for a meeting must be in place throughout the meeting and not just at the commencement of the meeting.
The 2013 Act also requires every company to observe secretarial standards specified by the Institute of Company Secretaries of India in regard to general and board meetings.
The presentations gave delegates a good overview of issues that concern boards and the progress made in tackling identified corporate governance challenges in different jurisdictions.
- Joanne Matisonn, Technical Advisor, CSSA
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