Corporate Governance -4 - Corporate Governance

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Questions and Answers

Which requirement is specified for the composition of the board according to Rule 210(5)?

There must be at least two independent non-executive directors. (correct)

All directors must have a financial connection with the issuer.

At least one executive director must be on the board.

At least 50% of the board must be independent directors.

Which of the following committees is explicitly mentioned as part of board governance?

Remuneration committee (correct)

Investment committee

Strategy committee

Compliance committee

What is the primary focus of Rule 1207(10D)?

Independence criteria for board members.

Requirements for conducting general meetings.

Enhanced disclosure of remuneration for directors and CEOs. (correct)

Guidelines for the engagement with stakeholders.

Which provision outlines the test for assessing the independence of a director?

Rule 210(5)(d) Signup and view all the answers

What is a required aspect of the audit committee's composition?

At least one member should have financial expertise. Signup and view all the answers

What is the minimum number of directors required on the audit committee?

Three directors Signup and view all the answers

Which committee requires that the majority of its members are independent, including the chair?

Audit Committee Signup and view all the answers

Which of the following is NOT a requirement for the Nominating Committee?

All members must be non-executive Signup and view all the answers

What is a specific duty of the audit committee as outlined in the code?

Establish and maintain an effective internal audit function Signup and view all the answers

How many members of the audit committee must have recent and relevant accounting expertise?

Two members Signup and view all the answers

Who is allowed to be a member of the Nominating Committee?

Any directors including executive directors Signup and view all the answers

Which provision outlines the duties and functions of the nominating committee?

Provision 4.1 and 4.4 Signup and view all the answers

What is the role of the lead independent director in relation to the Nominating Committee?

Should be a member of the committee Signup and view all the answers

Which committee does not specify that all members must be non-executive?

Nominating Committee Signup and view all the answers

What is necessary for compliance regarding the composition of the committees?

Comply or explain Signup and view all the answers

What is the requirement regarding the majority of non-executive directors on listed boards?

It must be applied on a comply or explain basis as per the code. Signup and view all the answers

Which rule mandates that at least one third of the board members must be independent?

Rule 210.5c of the listing rules Signup and view all the answers

What is required if the chairman of the board is not independent?

A majority of the board must be independent and a lead independent director should be appointed. Signup and view all the answers

What is the grace period for rookie directors appointed to a listed board to undergo mandatory training?

One year from the appointment date. Signup and view all the answers

According to the Companies Act, how often must all directors subject themselves to renomination and reappointment by shareholders?

At least once every three years. Signup and view all the answers

What is the only board committee prescribed by law for all listed companies?

Audit committee Signup and view all the answers

What is required for a director to be classified as independent according to the Code of Corporate Governance?

Independence in conduct, character, and judgment Signup and view all the answers

What document must all listed boards create for their committees?

Written terms of reference Signup and view all the answers

Which of the following disqualifies a director from being independent as per Listing Rule 210.5d?

Having served as a director for more than nine cumulative years Signup and view all the answers

In relation to board composition, which statement is true concerning listing rules?

They provide mandatory requirements that cannot be disregarded. Signup and view all the answers

What is the primary challenge in applying the definition of an independent director?

The subjectivity of the concepts involved Signup and view all the answers

Which provision requires that the chairman not be independent if a majority of the board is independent?

Provision 2.2 of the code Signup and view all the answers

According to the content, which of the following accurately reflects an independent director's decision-making?

They should exercise independent business judgment without perception of interference Signup and view all the answers

What must be done if a newly appointed director has prior experience as a director of a listed company?

They do not need to undergo mandatory training. Signup and view all the answers

Which of the following is NOT a criterion to assess a director's independence according to the Code?

Personal ownership of shares Signup and view all the answers

What is emphasized in the Code of Corporate Governance regarding the perception of independence?

It is a key part of determining a director's independence Signup and view all the answers

What additional requirement is mentioned concerning directors' remuneration disclosures?

Enhanced disclosure requirements for directors and CEOs Signup and view all the answers

How does the Code of Corporate Governance suggest directors should approach relationship assessments?

By considering whether relationships could reasonably be perceived as interfering Signup and view all the answers

What is the primary purpose of establishing a Board Risk Committee as outlined in the Code?

To identify and assess significant risks for strategic objectives Signup and view all the answers

Which Listing Rule requires the audit committee and the Board to comment on risk management and internal control systems?

Listing Rule 1207.10 Signup and view all the answers

Under Principle 8 of the Code, what should listed companies disclose regarding their remuneration policies?

The level, mix, and relationship between remuneration and performance Signup and view all the answers

What basis is used by companies to disclose remuneration details of Key Management Personnel according to Provision 8.1?

Comply or explain basis Signup and view all the answers

What specific remuneration details must be disclosed for directors and CEOs under Listing Rule 1207.10d?

All forms of remuneration including bonuses and stock options Signup and view all the answers

From which financial year must listed companies comply with exact remuneration disclosures for their directors and CEOs?

Financial years ending on or after 31st December 2024 Signup and view all the answers

Which of the following is NOT a focus area of Board Matters as outlined in the regime under Rule 710?

Compliance with legal audits Signup and view all the answers

According to the new emphasis on risk, how may the Board Risk Committee function in practice?

Merged with the Audit Committee to create a joint committee Signup and view all the answers

What is the relationship between remuneration disclosure and performance as stated in Principle 8 of the Code?

Remuneration should reflect companies’ value creation and performance Signup and view all the answers

What does the Code recommend regarding the nature and extent of significant risks companies are willing to take?

Companies must be open about the risks associated with their strategic objectives Signup and view all the answers

Study Notes

Corporate Governance Lecture Notes

Code of Corporate Governance: This document outlines the contents of the code, including its introduction, preamble, and full text. The code is well-written, easy to understand, and a thorough read.
Independent Director: The test of independence is based on provision 2.1 of the code, defining an independent director as someone independent in conduct, character, and judgment. The person must have no relationship with the company, related companies, substantial shareholders, or officers that could interfere or be perceived to interfere. This test is about perception.
Independence Tests: Listing Rule 210.5d establishes objective tests to disqualify a director from being considered independent. These tests are mandatory. Recent employment (within the last three years) by the listed group, or an immediate family member similarly employed and in a senior enough position for their remuneration to be handled by the remuneration committee disqualify a director from being independent.
Board Composition: Some requirements for board composition are in the code and others in the listing rules. Provision 2.3 of the code requires a majority of non-executive directors on all listed boards. Another code requirement is that at least one-third of the board members are independent, per Listing Rule 210.5c. There are requirements regarding the chairman as well, as per provisions 2.2 and 3.3 of the Code—either a majority of independent directors or a lead independent director needs to be appointed if the chairman is not independent.
Board Committees: The audit committee, remuneration committee, and nominating committee are crucial entities. Independent directors and non-executive directors must constitute the Audit Committee. The Audit Committee requires at least two members, including the chairman, who have recent and relevant financial management experience. Additionally, listing rule 719.3 prescribes an effective internal audit function.
Remuneration Committee: The Remuneration Committee (RC) is required to recommend remuneration frameworks and packages for each director and key management personnel. This committee is also required to consider overall remuneration aspects, including termination terms.
Nominating Committee: This committee, unlike others must not be entirely comprised of non-executive directors and may include a CEO or other executive directors. This committee recommends new directors to the board and helps determine needed expertise gaps.
Disclosure Requirements: Companies must be transparent with their remuneration policies, levels of compensation, relationships between pay and performance, and breakdowns of top 5 employee salaries (or key management personnel - KMP) in bands of $250,000 and in aggregate. Specific disclosure for directors and CEOs, along with bonuses and other incentives, is mandatory for annual reports as of December 31, 2024.
Listing Rule 210(5)(d): Provides specific disqualifying criteria for directors (e.g., prior employment, family member employment).
Practice Guidance: The code has examples and further explanations beyond mandatory compliance.
Additional Requirements for Directors: Listing rules and the code outline requirements for directors' experience, continuous training, and re-nomination every three years

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Description

Explore the key components of corporate governance, focusing on the code of corporate governance and the concept of independent directors. This quiz examines the criteria for independence and the mandatory tests outlined in the listing rules. Test your understanding of these principles and their implications for corporate governance practices.