W. Richard Frederick Governance Consultant

1. Is the board effective, passive, or dysfunctional? 2. Is the board composition good?  Skills, experience, and attributes?  Interpersonal skills?  Objective judgement:  Executive directors and non-executive directors?  Independent directors? 3. Is the board size appropriate:  Productive, constructive discussions?  Prompt and rational decisions? 4. Are the necessary committees there, and do they work? 5. Are the director selection and appointment procedures aligned with best corporate governance practices? 6. Does the board regularly review its composition and structure? 2

 Some types of board dysfunctions:  Certifying  Passive  Engaging  Intervening  Operating  Trophy  Paper  Rubber stamping  Country club 3

 Hard factors:  Financial expertise  Industry experience  Legal expertise  Experience of operating internationally  Gender distribution  Age distribution 4

 Soft factors:  Active listening  Thorough analysis  Clear, concise communication  Collaborative problem-solving  Objectivity  Honesty and integrity  Courage 5 5

 Executive directors:  Hold an operational position  Typically the CEO, the chief operating officer (COO), and/or the chief financial officer (CFO)  Best informed about the company’s business and its challenges since they make decisions daily about the company’s operations.  Non-executive directors:  Non-executive directors do not hold an executive position and they may or may not be independent 6 6

Cannot:  Be a recent employee  Have a recent material business relationship with the company  Currently receive or recently have received additional remuneration from the company (apart from a director’s fee, participation in the company’s share option or performance-related pay scheme, or as a member of the company’s pension scheme) 7

Cannot:  Have close family ties with any of the company’s advisers, directors or senior employees  Hold cross-directorships or have significant links with other directors through involvement in other companies or bodies  Represent a significant shareholder  Have served on the board for more than X years from the date of their first election 8

Companies should choose a board size that will enable them to:  Hold productive, constructive discussions  Make prompt, rational decisions  Efficiently organize the work of its committees, if these are established 9

 Aid to the board, not a substitute  Generally no executive powers  Focus on specialized areas of responsibilities  Chair and members normally independent  Key committees  Audit  Remuneration  Nominations 10

Role:  Approves or recommends the approval of the appointment of external auditors and oversees their relationship with the company  Monitors the effectiveness of, and receives regular reports from, the internal audit function  Reviews financial statements, procedures, and systems of internal control over financial reporting  Reviews arrangements for compliance with the requirements of regulators  Receives reports on the operation of the company’s “whistleblower” arrangements  May review the company’s risk-management framework Composition:  All independent, non-executive directors 11

 Identification of a board capability gap  Develop a person specification  Develop a search plan  Get to know the person  Select the best-qualified candidate  Recommend the candidate for election at the general assembly  Election process 12

 Put governance on the agenda  Audit practices compared to best practice standard  Conduct subsequent annual reviews