Hubert Rampersad

Following up on my previous article:

Board Charter

The board must adopt a formal board charter or other statement specifying matters which are reserved to it, which should include but need not be limited to the specific requirements and responsibilities of the directors. The responsibilities and powers of the board of directors and individual board members must be documented in form of a formal Board Charter or Terms of Reference document. The charter should also include rules on the number of board meetings, proxy rules, the number of board members, the tenure of membership, appointment and re-appointment procedures, and should refer to the code of conduct for the board. Every board is encouraged to have a board charter outlining the roles and responsibilities of directors. The following are some of the matters that should be considered when developing a board charter:

• A general outline of the board’s purpose.

• An overview of the board’s monitoring role.

• Structure and membership, including a requirement that one-third of members or two directors, whichever is higher, be independent non-executive directors.

• A formal schedule of matters reserved for the board, including authority levels.

• A position description of the role of the chairman, CEO, and executive directors.

• Appointment of board committees.

• Director’s orientation and education programs.

• Agreed procedure on taking independent professional advice at the company’s expense in furtherance of the directors’ duties (whether as a board or in their individual capacity).

The charter should be periodically reviewed and updated in accordance with the needs of the company and any new regulations that may have an impact on the discharge of the board’s responsibilities.

Board Meetings

Board meeting is an effective and formal method to discharge the responsibilities of the board of directors. Accordingly, the Chairman of the board should take an active lead in promoting mutual trust, open discussion and constructive dissent during board meetings. The frequency of board meetings depends upon company’s requirements. However, best practices suggest that board should meet frequently to effectively perform its functions. The board should meet frequently but in no event less than four times a year, all directors should attend the meetings whenever possible and the directors should maintain informal communication between meetings.

Board meetings are convened upon request by the Chairman. However, the Chairman may also call the meeting upon written request by two board members. In order to hold effective meetings, a formal agenda should be developed and approved by the Chairman. The Chairman should ideally consult with other members of the board and CEO before finalizing the agenda. The Chairman should ensure that all directors receive the agenda, minutes of prior meetings, and adequate background information in writing before each board meeting and when necessary between meetings. All directors should receive the same board information.

Best practices suggest that following items should frequently appear in the agenda for a typical board meeting:

• Business planning.

• Direction and strategy formulation, including review.

• Risk management issues and resolution.

• Budget, approval and monitoring against actual performance, including variance reporting.

• Funding requirements.

• Formulation and monitoring of key company policies.

• Evaluation of management’s performance.

• Corporate exercises, e.g. acquisitions, mergers, divestments and takeovers.

• Regulatory changes that impact upon the company’s business.

• Emerging business issues.

• Corporate disclosures and announcements.

• Investor and stakeholder relations.

• Litigation matters against the company.

The Chairman should ensure that all board members receive comprehensive information about what to be discussed in the board, the relevant documents and updates, minutes of prior meetings, etc. The directors have legal duty to keep themselves informed and updated and should ensure that they receive timely and adequate information regarding all matters to be discussed in the board meeting. Also, they should thoroughly read and understand all information before the meeting. Best practices suggest that board meeting papers with accompanying explanations should be received by board members at least 7 days prior to the meeting, so that they may get sufficient time to properly go through all papers. The timing of board meetings should be finalized in consultation with all directors to ensure that all directors can attend the meeting. The duration of the meeting should be such that ample time can be given to discuss each item on the agenda.

This article will be continued in the next part of this column.

Hubert Rampersad

Hubert Rampersad is president at Business School of the Americas. This column is drawn from his new book “Authentic Governance; Aligning Personal Governance with Corporate Governance” (Hubert Rampersad & Saleh Hussain, 2013). He can be reached at ; | His other books | His interviews in BusinessWeek & Fortune Magazine | His You Tube Video

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