Chp 4: Governance risk

Question 1

What are the six broad principle areas of the OECD?

Answer 1

1. Ensuring the basis for an effective corporate governance framework
2. The rights and equitable treatment of shareholders
3. Institutional investors, stock markets and intermediaries
4. The role of stakeholders in governance
5. Disclosure and transparency
6. The responsibilities of the board

Question 2

What are the three duties of a Company Secretary?

Answer 2

1. Arranging meetings of shareholders and the board of directors
2. Signing, authenticating and maintaining documents and registers
3. General admin duties

Question 3

Explain the Nomination Committee?

Role, NED representation

Answer 3

Oversees the process for board appointments and makes recommendatinos to the board
Ensures appointments are made on merit
Should be majority non-exec directors

Question 4

Explain the Audit Committee?

Role, NED representation, members

Answer 4

Responsible for the appointment, oversight and compensation of the external auditor.
Should establish mechanisms for dealing with compaints to do with accounting, internal controls and audit

All NEDs and financially literate
At least one financial expert
Minimum of 3 members within the UK

Question 5

Explain the role of the Risk Committee

Role (5), composition

Answer 5

Role
1. Approving the organisation’s risk management strategy
2. Reviewing key risks
3. Monitoring overall exposure
4. Assessing the effectiveness of risk management
5. Providing early warning to the board

Corporate governance best practice is for only independent NEDs to be on the committee

Question 6

What remuneration disclosures should the financial statements contain?

Answer 6

• Remuneration Policy
• Detailed arrangements for individual directors
• Performance conditions attached to remuneration packages
• Duration of contracts with directors
• The level of engagement with shareholders and staff regarding executive pay