PROMOTING GOOD CORPORATE GOVERNANCE

The Rights of Shareholders

The corporate governance framework should protect and facilitate the
exercise of shareholders rights.
A. Basic shareholder rights should include the right to:
1) Secure methods of ownership registration;
2) Convey or transfer shares;
3) obtain relevant and material information on the corporation on a timely and
regular basis;
4) Participate and vote in general shareholder meetings;
5) Elect and remove members of the board; and
6) Share in the profits of the corporation.
B. Shareholders should have the right to participate in, and to be sufficiently
informed on, decisions concerning fundamental corporate changes such as:
1) Amendments to the statutes, or articles of incorporation or similar
governing documents of the company;
2) The authorization of additional shares; and
3) Extraordinary transactions, including the transfer of all or substantially all
assets, that in effect result in the sale of the company.
C. Shareholders should have the opportunity to participate effectively and vote
in general shareholder meetings and should be informed of the rules, including
voting procedures that govern general shareholder meetings:
1. Shareholders should be furnished with sufficient and timely information
concerning the date, location and agenda of general meetings, as well as full
and timely information regarding the issues to be decided at the meeting.
2. Shareholders should have the opportunity to ask questions to the board,
including questions relating to the annual external audit, to place items on the
agenda of general meetings, and to propose resolutions, subject to reasonable
limitations.
3. Effective shareholder participation in key corporate governance decisions,
such as the nomination and election of board members, should be facilitated.
Shareholders should be able to make their views known on the remuneration
policy for board members and key executives. The equity component of
compensation schemes for board members and employees should be subject to
shareholder approval.
4. Shareholders should be able to vote in person or in absentia, and equal
effect should be given to votes whether cast in person or in absentia.
D. Capital structures and arrangements that enable certain shareholders to
obtain a degree of control disproportionate to their equity ownership should be
disclosed.
E. Markets for corporate control should be allowed to function in an efficient
and transparent manner.

1. The rules and procedures governing the acquisition of corporate control in

the capital markets, and extraordinary transactions such as mergers, and sales
of substantial portions of corporate assets, should be clearly articulated and
disclosed so that investors understand their rights and recourse. Transactions
should occur at transparent prices and under fair conditions that protect the
rights of all shareholders according to their class.
2. Anti-take-over devices should not be used to shield management and the
board from accountability.
F. The exercise of ownership rights by all shareholders, including institutional
investors, should be facilitated.
1. Institutional investors acting in a fiduciary capacity should disclose their
overall corporate governance and voting policies with respect to their
investments, including the procedures that they have in place for deciding on
the use of their voting rights.
2. Institutional investors acting in a fiduciary capacity should disclose how they
manage material conflicts of interest that may affect the exercise of key
ownership rights regarding their investments.
G. Shareholders, including institutional shareholders, should be allowed to
consult with each other on issues concerning their basic shareholder rights as
defined in the Principles, subject to exceptions to prevent abuse.
The Rights of Stakeholders
The corporate governance framework should recognize the rights of
stakeholders established by law or through mutual agreements and encourage
active co-operation between corporations and stakeholders in creating wealth,
jobs, and the sustainability of financially sound enterprises.
A. The rights of stakeholders that are established by law or through mutual
agreements are to be respected.
B. Where stakeholder interests are protected by law, stakeholders should have
the opportunity to obtain effective redress for violation of their rights.
C. Performance-enhancing mechanisms for employee participation should be
permitted to develop.
D. Where stakeholders participate in the corporate governance process, they
should have access to relevant, sufficient and reliable information on a timely
and regular basis.
E. Stakeholders, including individual employees and their representative
bodies, should be able to freely communicate their concerns about illegal or
unethical practices to the board and their rights should not be compromised
for doing this.
F. The corporate governance framework should be complemented by an
effective, efficient insolvency framework and by effective enforcement of
creditor rights.
CHAIRMAN OF THE BOARD

B.1. Shareholder Relations

Managing relations with shareholders
facilitating advisory and monitoring processes between shareholder and
Company
ensuring that shareholders are pre-warned of announcements or policy
changes (No surprises)
B.2 Leadership
providing leadership to the Board in planning and direction
representing the Company with the CEO in the community
B.3. Management Relations
Monitoring Company planning and operations
Building relationships
Guiding strategy
helping define problems
Monitoring and evaluating the performance of the CEO and Senior Officers
Representing shareholders and Board to management
Representing Management to the Board and shareholders
Maintaining accountability
Ensuring succession plans are in place at a senior management level
Meetings, as requested by CEO, with financial analysts
Meetings, as requested by CEO, with potential sources of debt and equity
capital
B.4. Board Management
Chairing meetings of the Board
Managing Directors performance
Communications with Directors between meetings
Setting meeting schedules
Setting meeting agendas
controlling meeting attendance
Determining Board information packages
ensuring all Board papers are distributed in advance of the meeting to
enhance the knowledge base and ensure an informed level of debate
helping appoint committees and define Terms of Reference
attending committee meetings where appropriate
Determining Director compensation
Optimizing use of the Boards resource
B.5. Board Effectiveness
encouraging all Board members to contribute
Planning Board composition and succession
Establishing and working towards a shared vision
B.6. Liaison with Stakeholders
In conjunction with the CEO, representing the Company to the staff, the
public, the media, suppliers and customers
in conjunction with the CEO, representing the Company in developing
relationships with government representatives and government agencies.
SUMMARY CORE DUTIES OF THE COMPANY SECRETARY

The following list includes both those duties which are legal obligations as well
as those which result from Best Practice. This is not a comprehensive list and
the Company Secretary may have to use their initiative to ensure that all core
duties are fulfilled. The Company Secretary will also have to refer to all
relevant legislation. The Company Secretary will need to fulfill the following
duties:
1) Board Meetings
Facilitating the smooth operation of the companys formal decision
making and reporting machinery;
organizing board and board committee meetings [e.g. audit,
remuneration, nomination committees etc];
formulating meeting agendas with the chairman and/or the chief
executive and advising management on
content and organization of memoranda or presentations for the
meetings; collecting, organizing and
Distributing information, documents or other papers required for the
meeting; ensuring that all meetings are minuted and that the minute
books are properly maintained and that all Board committees are
properly constituted and provided with clear terms of reference.
2) General Meetings
Ensuring that an Annual General Meeting is held in accordance with the
requirements of the Companies
Act and the companys Articles of Association; obtaining internal and
external agreement to all documentation for circulation to shareholders;
preparing and issuing notices of meetings, and distributing proxy forms;
preparing directors for any shareholder questions and helping them
create briefing materials;
Overseeing the preparations for security arrangements.
At meetings, ensuring that proxy forms are correctly processed and that
the voting process is carried out correctly; coordinating the
administration and minuting of meetings.
3) Memorandum & Articles of Association- Ensuring that the company
complies with its Memorandum and Articles of Association; drafting and
incorporating amendments in accordance with correct procedures.
4) Stock Exchange Requirements
Monitoring and ensuring compliance with the Stock Exchange
requirements as well as supervising the implementation of the model
code and/or the company code for dealing in the companys securities, as
appropriate;
managing relations with the Stock Exchange through the companys
brokers;
releasing information to the market;
ensuring the security of unreleased price-sensitive information;
Making applications for listing of additional issues of securities.
5) Statutory Registers
Maintaining the following statutory registers:
Members
Mortgage and charges;

Directors and secretary;

Directors interests in shares and debentures;
Interests in voting shares;
Debenture holders [if applicable].
6) Statutory Returns- Filing information with the Registrar of Companies
to report certain changes regarding the company or to comply with
requirements for periodic filing. Of particular importance in this regard
are:
Annual returns
Report & accounts;
Amended Memorandum and Articles of Association;
Returns of allotments;
Notices of appointment, removal and resignation of directors and/or the
Company Secretary;
Notices of removal or resignation of the auditors;
Change of registered office;
Resolutions in accordance with the Companies Act.
Other matters dealt with by company secretary include;
a) Report & Accounts- Coordinating the publication and distribution of
the companys annual report and accounts and interim statements, in
consultation with the companys internal and external advisers, in
particular, when preparing the directors report.
b) Share Registration- Maintaining the Companys register of members;
dealing with transfers and other matters affecting shareholding; dealing
with queries and requests from shareholders.
c) Shareholder Communications- Communicating with the shareholders
[e.g. through circulars]; arranging payment of dividends and interest;
issuing documentation regarding rights issues, capitalization issues, and
maintaining good shareholder relations; maintaining good relations with
institutional shareholders and their investment committees.
d) Shareholder Monitoring- Monitoring movements on the register of
members to identify any apparent stake-building in the companys
shares; making appropriate enquiries of members as to the beneficial
ownership of holdings.
e) Share and Capital Issues and Restructuring- Implementing properly
authorized changes in the structure of the companys share and loan
capital; devising, implementing and administering directors and
employees share participation schemes.
f) Acquisitions, Disposals & Mergers- Participating as a key member of
the company team established to implement corporate acquisitions,
disposals and mergers; protecting the companys interests by ensuring
the effectiveness of all documentation; ensuring that due diligence
disclosures enable proper commercial evaluation prior to completion of a
transaction; ensuring that the correct authority is in place to allow timely
execution of documentation.
g) Corporate Governance- Continually reviewing developments in
corporate governance; facilitating the proper induction of directors into
their role; advising and assisting the directors with respect to their
duties and responsibilities, in particular compliance with company law

and, if applicable, Stock Exchange requirements; counseling them when

preparing presentations and memoranda.
h) Non-Executive Directors- Acting as a channel of communication and
information for non-executive directors.
i) Company Seal- Ensuring the safe custody and proper use of any
company seals.
j) Registered Office- Establishing and administering the registered office;
attending to the receipt, co-ordination and distribution of official
correspondence received by the company, sent to its registered office;
ensuring the provision of facilities for the public inspection of company
register and documents.
k) Company Identity- Ensuring that all business letters, notices and other
official publications of the company show the name of the company and
any other information as required by the statutes and that the companys
name is displayed conspicuously outside all places of business.
l) Subsidiary Companies- Ensuring that procedures are in place for the
correct administration of subsidiary companies and that correct
information is given to the holding company; maintaining a record of the
groups structure.
m) General Compliance- Monitoring and putting in place procedures
which allow for compliance with relevant regulatory and legal
requirements, in particular under the Companies Acts, including legal
requirements on retention of documents; retaining the minimum set of
records required for commercial reasons; ensuring that procedures are
in place to allow adequate historical archives to be maintained.
Duties and responsibilities of Auditors
The Board of Directors shall ensure that persons who are qualified, reliable
and independent of the Board and Management are appointed as auditors. In
light of developments elsewhere, the Board shall Endeavour to:
Extend the definition and scope of audit to cover:To provide an independent opinion to those with interest in the company that
they have received from those responsible for the direction and management of
the company an adequate account of:
- The proper conduct of the companys affairs;
- The companys financial performance and position;
- Future risks.
Facilitate an extension of Auditors duties in regard to:
- Reporting on whether the company has financial and other risk management
controls
- Evaluating and reporting on aspects of propriety and efficiency
- Reporting directly to the Board, regulatory authorities and shareholders as
appropriate, when illegal acts are discovered and to monitor basic ethical
behavior particularly in regard to the public interest
Enhance the independence of the auditor from the Board and management;
Extend the liability of Auditors to third parties.
Duties of auditors
The duties of auditors are explained in the following cases.

 Acquaint himself with his duties under the Companies Act and the
articles of the company whose books and accounts he is called upon to
examine.
Examine the books, accounts, vouchers and other documents of the
company
Make a report for submission to members in general meeting.
Acts honestly i.e. not certify as true what he does believe to be true.
Exercise reasonable care, skill and caution of a competent careful and
cautious auditor.
Satisfy him that the companies securities exist and are in safe custody.
Provide professional advise if called upon to do so.
Approach his task with an inquiring mind and not with suspicion of
dishonesty.
Duty of care and Liabilities of an auditor
In preparing his audit report the auditor owes a duty of care to:
The company: since an auditor is a professional engaged by the company to
render certain services he owes the Company a legal duty of care in
preparing his report.
Third parties: an auditor owes a legal duty of care to third parties whom he
knew or reasonably ought to have known would rely upon his audit report.
To that effect such parties are his neighbors and the auditor may be
Held liable for loss or liability arising by reason of reliance on his audit
report.
The auditors legal duty of care is founded on the premise that there is a
special relationship between him and the company as well as such third
parties.
For a third party to successfully sue an auditor in damages for professional
negligence it must be established that:
The auditor was engaged on the premise that he professed to have certain
skills.
The auditor was at all material times aware that his report would be relied
upon i.e. he knew or reasonably ought to have known.
The third party suffered loss of financial nature
Internal corporate governance controls
Internal corporate governance controls monitor activities and then take
corrective action to accomplish organizational goals. Examples include:

Monitoring by the board of directors: The board of directors, with its

legal authority to hire, fire and compensate top management, safeguards
invested capital. Regular board meetings allow potential problems to be
identified, discussed and avoided. Whilst non-executive directors are
thought to be more independent, they may not always result in more

effective corporate governance and may not increase performance.

Different board structures are optimal for different firms. Moreover, the
ability of the board to monitor the firm's executives is a function of its
access to information. Executive directors possess superior knowledge of
the decision-making process and therefore evaluate top management on
the basis of the quality of its decisions that lead to financial performance
outcomes, ex ante. It could be argued, therefore, that executive directors
look beyond the financial criteria.

Internal control procedures and internal auditors: Internal control

procedures are policies implemented by an entity's board of directors,
audit committee, management, and other personnel to provide
reasonable assurance of the entity achieving its objectives related to
reliable financial reporting, operating efficiency, and compliance with
laws and regulations. Internal auditors are personnel within an
organization who test the design and implementation of the entity's
internal control procedures and the reliability of its financial reporting

Balance of power: The simplest balance of power is very common;

require that the President be a different person from the Treasurer. This
application of separation of power is further developed in companies
where separate divisions check and balance each other's actions. One
group may propose company-wide administrative changes, another group
review and can veto the changes, and a third group check that the
interests of people (customers, shareholders, employees) outside the
three groups are being met.[citation needed]

Remuneration: Performance-based remuneration is designed to relate

some proportion of salary to individual performance. It may be in the
form of cash or non-cash payments such as shares and share options,
superannuation or other benefits. Such incentive schemes, however, are
reactive in the sense that they provide no mechanism for preventing
mistakes or opportunistic behavior, and can elicit myopic behavior.

Monitoring by large shareholders and/or monitoring by banks and

other large creditors: Given their large investment in the firm, these
stakeholders have the incentives, combined with the right degree of
control and power, to monitor the management.
External corporate governance controls
External corporate governance controls encompass the controls external
stakeholders exercise over the organization. Examples include:
competition
debt covenants
demand for and assessment of performance information (especially
financial statements)
government regulations
managerial labour market
media pressure
takeovers