DICA Corporate Governance Workshop. Separation between Board and Management: Good Practices and Benefits 12 July 2017

Transcription

1 DICA Corporate Governance Workshop Separation between Board and Management: Good Practices and Benefits 12 July 2017

2 Contents Corporate Governance Overview Corporate Governance Principles Executive and the Board In Practice About Deloitte 1

3 Overview of the OECD Corporate Governance Principles

4 Corporate Governance Overview G20/OECD Principles of Corporate Governance The G20/OECD Principles of Corporate Governance are widely used as a benchmark by individual jurisdictions around the world (e.g. Financial Stability Board, World Bank). The objective of the Principles are: To help policymakers evaluate and improve the legal, regulatory, and institutional framework for corporate governance. To support economic efficiency, sustainable growth and financial stability by providing shareholders, board members and executives, etc. with the right incentives to perform their roles within a framework of checks and balances. 3

5 Corporate Governance Overview G20/OECD Principles of Corporate Governance Corporate Governance Involves a set of relationships between a company s management, its board, its shareholders and other stakeholders. Provides the structure through which the objectives of the company are set, and the means of attaining those objectives and monitoring performance are determined. Provide proper incentives for the board and management to pursue objectives that are in the interests of the company and shareholders and should facilitate effective monitoring, thereby encouraging firms to use resources more efficiently. The Principles: Ensuring the basis for an effective corporate governance framework The rights and equitable treatment of shareholders and key ownership functions Institutional investors, stock markets, and other intermediaries The role of stakeholder Disclosure and transparency The responsibilities of the board 4

6 Corporate Governance Principles

7 Principle 1: Effective corporate governance framework Transparent and efficient markets, be consistent with the rule of law and clear division of responsibilities. Responsibilities among different authorities should be clearly articulated and designed to serve the public interest Cross-border cooperation could be enhanced through bilateral and multilateral arrangements for information sharing Stock market regulations should support effective corporate governance Corporate governance related legal and regulatory requirements should be consistent, transparent and enforceable. 6

8 Principle 2: Rights and treatment of shareholders and ownership Protect and facilitate the exercise of shareholders rights Shareholders should be informed about extraordinary transactions, authorisation of additional shared, amendments to statutes or articles of incorporation or the company s governing documents. Secure methods of ownership registration Convey or transfer shares Obtain relevant and material information on the corporation on a timely and regular basis Participate and vote in general shareholder meetings Elect and remove members of the board Share in the profits of the corporation 7

9 Principle 3: Investors, stock markets, and other intermediaries Equitable treatment of all shareholders. All shareholders, including minority and foreign shareholders should have the opportunity to obtain effective redress for violation of their rights. Institutional investors acting in fiduciary capacity should disclose their corporate governance with respect to their investments. Advisors, analysts and others to disclose and minimise conflict of interest. 8

10 Principle 4: The role of stakeholder Rights of stakeholders and co-operation between corporations and stakeholders. All shareholders of the same series of a class should be treated equally Insider trading and abusive self-dealing should be prohibited Members of the board and key executives should be required to disclose to the board whether they, directly, indirectly or on behalf of third parties, have a material interest in any transaction or matter directly affecting the corporation. 9

11 Principle 5: Disclosure and transparency Ensure that timely and accurate disclosure on all material matters. Financial and operating results of the company Company objective and non-financial information Major share ownership, including beneficial owners, and voting rights Remuneration of the members of the Board and key executives Related party transactions 10

12 Principle 6: Roles and Responsibilities of the Board Strategic guidance of the company, monitoring of management and accountability to the company and the shareholders. Provide entrepreneurial leadership, set strategic objectives, and ensure that the necessary financial and human resources are in place for the company to meet its objectives. Establish a framework of prudent and effective controls which enables risks to be assessed and managed, including safeguarding of shareholders' interests and the company's assets. Review management performance. Set the company's values and standards (including ethical standards), and ensure that obligations to shareholders and other stakeholders are understood and met. 11

13 Executive and the Board In Practice

14 Executive and the Board Strategic guidance, monitoring of management and accountability Board of Directors Report Assert Assure Risk Management Business unit management and staff Internal Audit Governance structure, policies and information flow Risk assessment methodology Measurement, aggregation rules and tools Monitor and report risk exposure Enable Risk identification and assessment Risk mitigation plans to exploit, reduce, transfer or avoid risk Provide assertions on risk exposure by functional, business unit and/or geography Validation and reporting Risk identification and assessment Risk mitigation plans to exploit, reduce, transfer or avoid risk Provide assertions on risk exposure by functional, business unit and/or geography 2 nd Line 1st Line 3rd Line 13

15 Separation of Duties Provide entrepreneurial leadership, set strategic objectives. The Board Governs Oversee the development and implementation of an adequate internal control systems Monitor the independent assurance function Monitorthe operations of the company and ensure that it is being run in conjunction with the mandate of the company and the will of the shareholders Stewards of the company Createsthe vision, direction and policies for the company The Executive Manages Establish and maintain an adequate and effective system of internal controls Develop a system to monitor and control risks Responsiblefor driving those operations, having a combined role results in monitoring oneself, once again opening the door for abuse of the position. Reports to the Board Implementspolicies according to the board s directives 14

16 Risk Management A framework of prudent and effective controls which enables risks to be assessed and managed. Bears the overall responsibility for ensuring that operations comply with approved policies, applicable laws and regulations, etc. Should establish fit and proper standards in appointing senior management and ensure that there is an adequate succession planning. Ensures that the institution s related party transactions are undertaken on an arm s length basis. Responsible for overseeing the governance of risk in the institution. Ensures that senior management maintains a sound system of risk management and internal controls. Determines the nature and extent of the significant risks which the Board is willing to take in achieving its strategic objectives. Obtains a periodic independent assessment of the design and effectiveness of the company s risk governance framework. 15

17 Internal Controls Safeguarding of shareholders' interests and the company's assets. Responsible for the risk governance of the company and determine the nature and extent of risks which the company may undertake. Ensures that management maintains a sound system of risk management and internal controls. Assurance from the CEO and CFO that the financial records have been properly maintained and the financial statements give a true and fair view of the company s operations and finances; and an effective risk management and internal control system has been put in place. Opinion on the adequacy of the internal controls, addressing financial, operational and compliance risks. 16

18 To Separate or Not To Separate? Balancing executive and oversight roles on the board. Advantages Ensures strong, central leadership and increases efficiency. Leadership and oversight in light of their superior knowledge of the organization due to their managerial roles. Risk of concealment from the board potential problems and any issues created by their management. Total independence may result in less access to the facts and insufficient industry knowledge or institutional respect, thus impinging on the ability to provide informed, effective feedback and oversight. The Executives have higher credibility and authority with the board and community. Disadvantages Lack of oversight and diminishes the independence of a board. Challenges of theconstant balancing act between day-to-day operations and bigpicture decision making. Participation and candorfrom Directors may discouraged when discussions are held in the presence of Executives. The practice of voting with the Executives under the assumption that the Executive knows best may lead to a rubber-stamp board. Potential (appearance of) conflicts of interest are often created when Executives serves on the board that employs and sets the their salary. 17

19 About Deloitte

20 Centre for Corporate Governance Opening doors to the boardroom The SEA Center for Corporate Governance (CCG) brings together the knowledge and experience of Deloitte member firms around the world in the critical area of corporate governance. The Centre promotes dialogues with key influences and business leaders, corporations and their board chairman and members, investors, the accounting profession, academia and government. It also develops advance thinking on global corporate governance issues such as board oversight of management, director effectiveness, audit committee effectiveness, and executive compensation. Key programs Services Providing governance services to board and board committee (e.g., board assessments, director development training programs, director on-boarding training, IPO readiness advisory, etc.). Eminence Web presence, research, thought leadership, newsletters, surveys, events locally and at SEA level. SuperDirector initiative Engaging with SuperDirectors who hold multiple directorships in companies. Regulatory and policy Engaging key governance policy influencers locally and across the region. Forums Hosting governance forums to share knowledge and insights beyond the boardroom. For more information, please visit 19

21 About The Speaker We have assembled a team of professionals who are experienced in providing governance and control advisory services. David Chew Executive Director, Deloitte Southeast Asia Co-Leader, SEA Centre for Corporate Governance David is a partner with Deloitte Singapore. He started his career in securities and corporate law enforcement followed by professional practice in litigation support, corporate restructuring and financial due diligence. David has spent the last 12 years advising clients in governance, risk management, internal controls and compliance matters. Some of his recent briefs involving advising clients in addressing regulatory queries and actions relating to governance and control issues. David also leads Deloitte Southeast Asia s internal audit practice group and serves on the board of a charitable organization. Aye Cho Executive Director, Deloitte Southeast Asia AyeChohas15yearsofprofessional experience in the provisions of Auditing Services in Singapore and Financial Advisory & Tax Services in Singapore and Myanmar. He specialises in mergers & acquisitions, valuations and Myanmar taxation. Besides working with many multinational corporations to establish their presence in Myanmar, he has also supported local Myanmar business owners in pricing their businesses and facilitating negotiations with foreign investors. Aye Cho speaks regularly at local and overseas conferences on inbound investments into Myanmar, the Myanmar tax framework, and business valuation. 20

22 Deloitte refers to one or more of Deloitte ToucheTohmatsu Limited, a UK private company limited by guarantee ( DTTL ), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as Deloitte Global ) does not provide services to clients. Please see for a more detailed description of DTTL and its member firms. Deloitte provides audit, consulting, financial advisory, risk management, tax and related services to public and private clientsspanning multiple industries. With a globally connected network of member firms in more than 150 countries, Deloitte brings world-class capabilities and highquality service to clients, delivering the insights they need to address their most complex business challenges. Deloitte s morethan 225,000 professionals are committed to making an impact that matters. Deloitte serves 4 out of 5 Fortune Global 500 companies. About Deloitte Southeast Asia Deloitte Southeast Asia Ltd a member firm of Deloitte ToucheTohmatsu Limited comprising Deloitte practices operating in Brunei, Cambodia, Guam, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam was established to deliver measurable value to the particular demands of increasingly intra-regional and fast growing companies and enterprises. Comprising 270 partners and over 7,300 professionals in 25 office locations, the subsidiaries and affiliates of Deloitte Southeast Asia Ltd combine their technical expertise and deep industry knowledge to deliver consistent high quality services to companies in theregion. All services are provided through the individual country practices, their subsidiaries and affiliates which are separate and independent legal entities. About Deloitte Singapore In Singapore, services are provided by Deloitte & Touche LLP and its subsidiaries and affiliates Deloitte & Touche Enterprise Risk Services Pte Ltd