Transcript Financial management

NATIONAL NURSES ASSOCIATION
Seminar
On
Corporate Governance
Ronald Mukhesi
SANNAM Finance Officer
[email protected]
Pretoria, South Africa
1 October, 2006
This Presentation Covers
• Background and Definition
• Development of Corporate Governance
• Characteristics of CG
• Contextual Application
• The 2nd King Report on CG
Committee Composition
Problems
What are your challenges?
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What do you want to learn?
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Background and Definition
– What is Corporate Governance?
• Background:
– The concept was born in the late 1980’s
– Separation of ownership from Management
• Definition:
– System whereby entities are managed and controlled
Development of CG
• Treadway Commission (US)
– Investigated and made recommendations relating to
financial aspects of Corporate Governance
• Cadbury Commission (UK) (setup in 1991)
– Considered financial reporting and accountability,
good practices concerning responsibilities of directors
• King Committee (RSA)
– Recommendation on effective implementation of CG
in South Africa
Principles of Corporate
Governance
• Discipline – Commitment to adhere to correct and proper
behavior
• Transparency – An outsider is able to make meaningful
analysis of the company
• Independence – Management is not dominated by its
largest shareowners
• Accountability – Decision makers are held accountable
• Fairness – The rights of Various groups are
acknowledged and respected
• Social Responsibility- Awareness and responsiveness to
social issues
Contextual Application
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Company
Shareholders
Director
Board of Directors
Executive Directors
Non Executive Directors
= Organization
= NNA’s (Nurses)
= Network Member
= Network
= Executive Committee
= Non Exco Members
The 2nd King Code (RSA)
Application of Code
– All companies with securities listed on the JSE
– Banks, Financial and Insurance entities
– Public Sector Enterprises and Agencies (PFMA)
– All other Companies are encouraged to adopt the
code
The 2nd King Code (RSA)
Board and Directors
The Board
– The board is ultimately accountable and responsible
for performance and affairs of the company
– The board can not discharge their responsibility by
delegating to board committees. (no Shield)
– A brief CV of each director standing for election or
re-election should accompany the notice of the AGM
– A charter setting out the responsibilities of the board
should be disclosed in the annual report
The 2nd King Code (RSA)
Board and Directors
• The board must:
– Give strategic direction to the company
– Appoint the Chief Executive Officer and ensure
succession planning
– Retain full and effective control over the company
– Monitor management in implementing board plans
and strategies
– Identify and monitor key risk areas that affect the
enterprise and develop KPIs accordingly
The 2nd King Code (RSA)
Board and Directors
The Board Composition
– Should comprise a balance of Executive and nonexecutive directors
– A majority of non-Executive is preferred of whom
sufficient number should be independent of
management
– Consider demographics (gender)
The 2nd King Code (RSA)
Board and Directors
The Chairman and CEO
– The Chairman should be an independent nonexecutive director
– The function of the CEO should be separate from that
of the Chairperson
– The performance of the CEO and the Chairperson
should be appraised at least annually
The 2nd King Code (RSA)
Board and Directors
Directors
– Directors should have necessary skills and experience
to bring informed judgment on issues of importance
to the company
– Directors should be categorized as follows:
Executive directors – Involved in the day to day
running of the company
Non-Executive directors – Not involved in day to day
Independent directors – A non-executive director who
The 2nd King Code (RSA)
Board and Directors
• An informed third party with relevant knowledge would
conclude that the director is independent
• Is not a member of immediate family of an individual who has
been in any of the past three years employed by the company or
acted as an executive director
• Is not a significant supplier or customer
• Is free from any business relationship that could materially
interfere with his/her capacity to act in an independent manner
The 2nd King Code (RSA)
Board and Directors
Board committees (Sub-Committees)
– Are an aid to assist the board and its directors
– The board should formally delegate some of its
functions to board committees
– Board committees should have formally determined
TORs, life span, clearly reporting procedures and
written mandates
– As a minimum, boards should have audit and
remuneration committees (nominations)
– Performance & effectiveness thereof be evaluated
The 2nd King Code (RSA)
Board and Directors
Audit committee (Sub-Committees)
– Consists of majority of independent non-executive
directors and financial literate
– The Chairperson should be independent – non
executive directors
– Audit com…to have written TORs
– Recommends the appointment of external auditors
The 2nd King Code (RSA)
Board and Directors
Remuneration committee (Sub-Committees)
– Should determine remuneration of Executive directors
– Consist entirely of independent directors
– A substantial portion of total remuneration should be
performance based
The 2nd King Code (RSA)
Board and Directors
Nomination committee (Sub-Committees)
– Assists in the appointment of directors
– Comprise only of non-executive directors of whom
majority should be independent
Cal de Sac
THE END