Governing Body Composition

• The GB (governing body) should balance knowledge, skills, experience, diversity, and independence to govern effectively and objectively.

Composition of the Governing Body

• The GB should take responsibility for its composition by directing and approving processes to achieve a balance of skills, knowledge, diversity, independence, and experience.
• Factors to consider when determining the number of GB members include the required mix of knowledge, independence, skills, and experience to govern the organization.
• The factors to consider also include the number of members to serve on GB committees, meet quorum, regulatory requirements, and diversity targets.
• The GB should have a majority of non-executive members, with most of them being independent.
• The CEO and at least one other executive, possibly including the CFO, should be on the GB for direct interaction with management.
• The GB should promote diversity including knowledge, age, skills, race, and gender, in its membership for decision-making and governance.
• The GB should set targets for race and gender representation.
• Staggered rotation of GB members should be established to introduce new skills while retaining knowledge and maintaining continuity.
• The GB should have a succession plan that identifies, mentors, and develops future candidates.

Nomination, Election, and Appointment of GB Members

• Nominations for GB member elections should be approved by the GB as a whole.
• Nomination, election, and appointment processes should be formal and transparent.
• Before nominating candidates, the GB should consider the necessary skills, knowledge, experience, and diversity of the GB and whether the candidate meets fit and proper criteria.
• Incumbent's nomination for re-election must include details of professional commitments and confirmation of sufficient time to fulfill responsibilities.
• Candidates for non-executive member elections must provide details of commitments and confirm sufficient time to fulfill responsibilities.
• Candidates' backgrounds and qualifications should be independently investigated and verified prior to nomination.
• A profile of each candidate standing for election at the AGM, including existing commitments, should accompany the AGM notice.
• The profile should include a statement from the GB confirming support for the election or re-election.
• Terms and conditions should be formalized in a letter of appointment upon election to the GB.
• Incoming members should receive induction to allow them to contribute effectively as soon as possible.
• Members with limited governance experience should receive mentorship and be encouraged to undergo training.
• GB members should receive regular briefings and professional development on risks, legal matters as well as corporate governance and external environment developments.

Independence and Conflicts

• GB members should submit a declaration of financial, economic, and other interests held by themselves and related parties annually.
• Members must declare any conflicts of interest regarding the agenda at the beginning of GB or committee meetings.
• Conflicts should be managed proactively as determined by the GB, subject to legal provisions.
• The GB may categorize non-executive members as independent if there is no relationship that could influence decisions or cause bias.
• Indicators the GB should consider for independence include if the member is a provider of capital, or a representative, participants in share-based incentive schemes, owns the organization's securities, or has previously been an executive manager.
• Considerations for independence also include being an external auditor, a professional advisor, member of the GB of supplier, is entitled to remuneration based on organization performance.
• A non-executive member may continue to serve independently beyond nine years if they continue to exercise objective judgement.
• Whether the member exercises objective judgement is judged from the perspective of a reasonable and informed third party.

Disclosures

• Disclosures related to GB composition should include whether the GB is satisfied with its mix of knowledge, skills, experience, diversity, and independence.
• Disclose targets for gender and race representation, progress, categorization of members as executive or non, qualifications and experience of members, each member's periods of service, and other GB and professional positions.
• Disclose each member's age and reasons for removal, resignation, or retirement.

Chair of the Governing Body

• The GB should elect an independent non-executive member as chair to effectively lead the GB and its governance responsibilities.
• The GB should appoint an independent non-executive member as the lead independent.
• The lead independent fulfils functions such as leading, serving as a sounding board, acting as an intermediary, addressing shareholder concerns, strengthening independence, chairing discussions, and leading performance appraisals.
• The roles, responsibilities, and terms of the chair and lead independent should be documented.
• The organization's CEO should not chair the GB, and a retired CEO should not become chair until three years after their tenure.
• The chair and GB should determine the number of outside professional positions that the chair is allowed to hold to perform their duties effectively.
• When appointing the chair to GB committees, consider the effect on the overall power balance.
• The chair should not be a member of the audit committee or chair the remuneration committee, but can be a member of the risk governance, nominations, and the social and ethics committees.
• Succession planning should be put in place for the position of the chair.
• Disclosures related to the chair should include whether they are considered independent and if an independent non-executive member has been appointed as the lead independent.

Committees of the Governing Body

• The GB should ensure its delegation arrangements promote independent judgement, assist with balance of power, and aid in effective duty discharge.
• The GB should decide when to delegate roles to individual members, GB members, or standing ad hoc-committees.
• If the GB decides not to delegate specific responsibilities to a committee, it should ensure it fulfills those responsibilities itself.
• Delegation to an individual member should be recorded and approved.
• Delegation to committees should be recorded via formal terms of reference that are approved and reviewed annually.
• The terms of reference should address the committee’s composition and process for appointing non-GB members, roles, responsibilities, functions, delegated authority, tenure, reporting procedures, access to resources, meeting procedures, and arrangements for evaluating performance.
• Roles, allocation responsibilities, and committee member composition should be considered to achieve effective collaboration, define specific roles with committees, and maintain a balanced distribution of power.
• Each committee of the GB should have the knowledge, skills, experience, and capacity to execute its duties effectively.
• Each committee should have a minimum of three members, subject to legal provisions.
• Executive and senior management should be invited to committee meetings on a standing or ad hoc basis to provide information and insights.
• GB members can attend any committee as observers and must not participate, vote, or receive fees without the chair's consent.
• The GB should apply its collective mind to information, opinions, reports, and statements presented by the committee.
• The overall role, responsibilities, functions, composition, member qualifications, experience, advisors, key areas of focus, meeting attendance, and fulfillment of accountability should be discussed in relation to each GB committee.
• Establishing an audit committee is a statutory requirement for some organizations.
• An audit committee should provide independent oversight of the organization's assurance functions, combined assurance engagements, the integrity of financial statements, and external reports.
• A statutory audit committee can make decisions regarding duties and is accountable for performance.
• The GB may delegate responsibilities like approving financial statements to the audit committee, but remains ultimately accountable.
• The audit committee should dedicate sufficient time if the GB delegates risk governance.
• The audit committee should oversee the management of financial and other risks that affect the integrity of external reports.
• Audit committee members should have financial literacy, skills, and experience to perform their duties.
• All members of the audit committee should be independent, non-executive members of the GB.
• The GB should appoint an independent non-executive member to chair the audit committee.
• The audit committee should meet annually with the internal and external auditors without management present for an exchange of views and concerns.
• Required statutory disclosures and paragraph 50 disclosures should be applied.

Committee Responsibilities

• Nomination, election, member appointment, succession planning, and performance evaluation should be overseen by a dedicated or another relevant committee.
• The nominations committee should be all non-executive members of the GB, with a majority being independent.
• Oversight of risk governance should be allocated to a dedicated or another appropriate committee.
• Have joint membership if the audit and risk committees are separate.
• The risk committee should have executive and non-executive GB members, with a non-executive majority.
• Oversight of remuneration governance should be allocated to a dedicated committee or another appropriate committee.
• All members of the committee for remuneration should be non-executive GB members, with a majority of independent non-executive members.
• The committee should be chaired by an independent non-executive member.
• A social and ethics committee should be established for oversight of ethics, citizenship, sustainable development, and stakeholder relationships or add this to another appropriate committee.
• Social and ethics responsibilities should include any statutory duties or delegations by the GB.
• The social and ethics committee should have executive and non-executive members, with a non-executive majority.
• Refer to paragraph 50 for recommended disclosures.