What are the key considerations for a board s constitution and committee charters?

Transcription

1 What are the key considerations for a board s constitution and committee charters? Contents: page 2 page 3 Board Constitution Board Committee Charters page 4 Remuneration committee charters: page 5 Nomination committee charters:

2 Board Constitution The constitution is a key driver of an organisation s corporate governance. It outlines the contract between the company and each member, the company and the company secretary, a member and the other members. It covers the basics governing an organisation including powers, responsibilities, roles and principal activities. Constitutions cover a range of rules including the appointment, removal and power of directors, procedures for conducting director meetings and rules regarding transferring shares and paying dividends. All new directors need to be aware of the duties in relation to the organisation s constitution. A company can modify or repeal its constitution, or a provision of its constitution, by passing a special resolution. A proprietary company does not need to lodge a copy of its constitution. Writing a constitution can be a useful tool for clarifying processes and principles, even if an organisation is not yet ready to incorporate. An example of a board constitution is available from our online library. THE CONSTITUTION IS A KEY DRIVER OF AN ORGANISATION S CORPORATE GOVERNANCE.

3 Board Committee Charters There are three types of Committee Charters: Audit, Remuneration and Nomination. Audit committee charter: An audit committee oversees and monitors the company s audit processes, including the company s internal control activities. The committee charter provides a blueprint for the committees operations. It should be specifically written to meet the needs of the company s industry, objectives and culture. The charter should clearly articulate the committee s role and responsibilities, composition, structure and membership requirements, authority, processes and procedures as approved by the board. The charter should not be overly detailed or prescriptive. Is there a formal process to ensure that the charter is regularly monitored and reviewed so that it remains relevant to the company s needs, reflects current regulatory requirements and audit committee good practice? Consider referring to the company s code of conduct for expected behaviours and processes for resolving conflicts of interests. An example of an Audit committee charter is available from our online library.

4 Remuneration committee charters: The remuneration committee assists the board in the oversight of the company s remuneration, which includes remuneration, bonuses and incentives for the CEO and employees. Ensure the charter is accessible to all directors, executives and employees, for example, it could be displayed on the company s website. The charter can only be amended by the board. An example of a Remuneration committee charter is available from our online library. Nomination committee charters: The nomination committee oversees and monitors board and senior executive performance, succession planning and the company s diversity policy. Ultimate responsibility for selection and appointment practices rests with the entire board. A formal and transparent procedure for the selection appointment and reappointment of directors helps promote understanding and confidence by investors. An example of a Nomination committee charter is available from our online library.

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