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RICHARD WEJULI WABWIRE
CORA CONSULT
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` Definitions: Corporate Governance/Board of Directors
` Key Roles & Responsibilities of the Board of Directors
` Fiduciary Duties
`
Board Dynamics` Group think
` Managing Board Dynamics
` Conclusion
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Corporate Governance is a mechanism through which boards and directorsboards and directorsare able to direct, monitor and supervise the conduct and operation of the
corporation and its management in a manner that ensures appropriate
levels of authority, accountability, stewardship, leadershipleadership, direction and
control.
³³The importance of The importance of
corporate governancecorporate governancelies in its contributionlies in its contribution
both to businessboth to business
prosperity and toprosperity and to
accountability.´accountability.´
Paragraph 1.1, Committee on
Corporate Governance:
Final Report Hampel Committee
³Corporate governance is concerned with³Corporate governance is concerned with
holding the balance between economic andholding the balance between economic and
social goals and between individual andsocial goals and between individual and
communal goals««communal goals«« TheThe aim is to align asaim is to align as
nearly as possible the interests of individuals,nearly as possible the interests of individuals,
corporations and society.´corporations and society.´
Sir Adrian Cadbury
Corporate Governance Overview, 1999
[World Bank Report]
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o Leadership for efficiency««
o to compete in the global economy, create jobs
o Leadership with probity «..
o because investors require confidence
o to provide assurance of management's integrity
o Leadership with responsibility«.
o to take account of broader stakeholder interests
o
Leadership that is accountable and transparent
o to build trust in companies and in the economy !!
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` Primary responsibility rests with the Bank¶s board and Senior management
` The Central Bank (BOU) has an important role to play by providing guidance &
assessing bank practices (Financial Institutions Act)
` Other stakeholders can promote good governance;
Shareholders
Depositors & customers
Employees
Auditors
Uganda Institute of Bankers Credit Reference Bureau
Government, Capital markets Authority, Uganda Securities Exchange
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A group of people (directors)
appointed or elected by
shareholders to align the
company¶s governance,
performance and
conformance by;
� Offering strategic direction to
the company
� Oversight
� Exercising Fiduciary
responsibility
³A director is any person
occupying the position of a
director by whatever name
designated, including any
person with whose
directions or instruction the
directors of a corporation
are accustomed to act´.
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³The board should exercise compelling and relentless leadership³The board should exercise compelling and relentless leadership
and should not underestimate the power of leading by exampleand should not underestimate the power of leading by example --
evidenced by high levels of visibility and integrity, strongevidenced by high levels of visibility and integrity, strong
communications, and demanding expectations. This leadershipcommunications, and demanding expectations. This leadership
should be clear toshould be clear to allall within the organization, as well aswithin the organization, as well as
shareholdersshareholders andand other stakeholdersother stakeholders .´.´
BoardroomBoardroom BehaviorsBehaviors
A report prepared for Sir David Walker A report prepared for Sir David Walker
by the Institute of Chartered Secretaries and Administrators , UK by the Institute of Chartered Secretaries and Administrators , UK
June 2009June 2009
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o Governance
o Conformance
o Performance
Board Chairman
Chief Executive Officer/Managing Director
Board Committees (executive and non-executive directors)
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I Governance:
o Exercise of power through oversight, strategy, policies and
delegation
o
Stewardship of company values- professionalism, quality,integrity, quality, teamwork etc
II Conformance
Compliance with laws, industry best practice & standards- FIA,
BOU Act, UIB, ICGU, Co¶s Act, Accounting, Audit, Risk mgt, Tax
Laws, Investment Laws, Procurement Laws, Employment Laws
Social Security Laws etc
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III Performance,
o Establish corporate strategy (risk mgt, human resource,
remuneration, business plans, monitoring and evaluation ,
budget review and approvals etc)
o Set performance objectives and Indicators
o Monitor and evaluate Corporate, board and management
performance
o Resource/assets mobilization, deployment and oversight
o Stakeholder engagement
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o Setting Tone at the top
o Defining Business Philosophy
o Independent of the influence of Management
o Clearly know their responsibilities and powers
o Focus on Policy Making and general direction
o No role in day to day affairs
o No conflict of interest
o Understand the bank¶s risk profile
Hence training programs for Board of Directors , IMPERATIVE!
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` Putting in place board governance arrangements
Board committees to support decision process
Supporting functions to regulate processes
Board procedures and rules, e.g. conflicts of interest
Delegated authorities for management
` Ensuring proper oversight and supervision
Management reporting and public disclosures
Assurance processes and controls
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o Primary role
Provide overall leadership to the board
o Function
Principal link between board and CEO/management team
Responsible for board agenda and work plan
Work with board committee chairpersons
Should be involved in selection and induction of new directors Counsel individual directors on their performance
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o Primary role
Lead the management team, reporting to the board
o Function
Work closely with board chairman
Responsible for performance of management team
Formulate corporate strategy, annual business plan and budget
Responsible for corporate and financial objectives
Formulate major corporate policies
Ensure continuous improvement in services and products
Manage relations with investors, major customers, regulators
Responsible for company¶s long-term sustainability
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` Preferably comprising non-executive board members, in the areas of:
Audit
Risk Management
Human Resource
Credit
Remuneration
Others e.g. EHS/OHS, Corp. Governance
` With well defined TORs/objectives, authorities and tenure
` Without indulging in day to day affairs- no executive powers
` Full board to review their performance
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o Assist the board in its decision making Bring together non-executives and management
Allow detailed discussion on management matters
But, filters out operational issues that remain with management
Focus on strategic decisions required of the board
o Supports board responsibilities in key areas
Audit, internal controls and risk
Executive compensation and management appointments Governance issues and corporate policies
Nomination and selection of non-executive directors
Others, e.g. health, safety, environment, etc.
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Supervises and co-ordinatesboard papers &presentations
Takes the minutes of board meetings
Resolves organizationalmatters for board meetings
orks closel ith hairmanand on board agenda
Arranges the annualshareholders meeting andother special meetings
nsures compliance iththe board procedures
versees, conductsinduction trainings for ne l appointed directors
xplains the proceduralrequirements of la s, the Memo& Arts, b ±la s and policies of the compan and industr
Ke link bet een companand non-executive directors
ounsel and support tonon-executives, liaison
ith external stakeholdersetc
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Board¶s Role in Risk Management
ooThe board should know about and evaluate the:The board should know about and evaluate the:
o Most significant risks facing the Bank
o Possible effects on stakeholders
o Bank¶s management of a crisis
o Importance of stakeholder confidence in the Bank
o Communications with the investment community
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Board¶s Role in Risk Management
ooTheThe board should ensure that:board should ensure that:
o Sufficient time is devoted to discuss risk strategy
o Appropriate levels of awareness exist throughout the Bank
o Risk-management processes work effectively
o A clear risk-management policy is published
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³The board should exercise compelling and³The board should exercise compelling and
relentless leadership and should not underestimaterelentless leadership and should not underestimatethe power of leading by examplethe power of leading by example -- evidenced byevidenced by
high levels of visibility and integrity, stronghigh levels of visibility and integrity, strong
communications, and demanding expectations. Thiscommunications, and demanding expectations. This
leadership should be clear to ALL
within theleadership should be clear to ALL
within theorganization, as well as shareholdersorganization, as well as shareholders andand other other
stakeholdersstakeholders .´.´
BoardroomBoardroom BehaviorsBehaviors
A report prepared for Sir David Walker A report prepared for Sir David Walker
by the Institute of Chartered Secretaries and Administrators , UK by the Institute of Chartered Secretaries and Administrators , UK
June 2009June 2009
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o Appointing the MD and Senior Management
o Defining powers and responsibilities of senior management
o Disclosing conflict of interest
o Ensuring disclosure to promote transparency and marketdiscipline
o Formulating policies :Credit, Investments and Treasury
Management, Human Resources, Internal Audit and Control,
Compliance, Risk Management etc
o Communication and compliance
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Internal Audito Creation of separate department of Internal Audit, with
o Professional Staff
o Full Scope coverage
o Audit Charter & Manual
o Head of Internal Audit reporting to the board or the Audit Committee
Management Information Systems
` Ensuring existence of an effective Management Information System
` For keeping itself abreast with
Activities
Operating Performance & financial condition
Operating environment
Major Risks
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Board Meetings
o At least quarterly, preferably more frequently
o Individual Directors should attend at least half of the meetings in a year
o Information through agenda items in advance
o
Recording minutes of deliberations proper in detail
Others
o Reviewing the effectiveness of Internal Controls
o Strengthening Risk Management
o
Annual Financial Statements :o Coverage of Directors¶ Report
o Statement on Internal Controls
o Risk Management Framework
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Statutory duties are stipulated in the enabling instrument (FIA, BOU Act,
Memo & Arts)
o Fiduciary duties generally arise by virtue of the common law
relationship between principle and agent (i.e. the Bank and the
Board/Management)
o However in the Banking industry there is a degree of statutory
enactment on fiduciary duties (the FIA)
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y Fiduciary duties include;
y the duty of care and skill,
y duty to act in good faith,
y duty of fair dealing
y
Breach of these fiduciary duties may lead to civil
liability (damages, financial penalties)
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Section 56 FIA
³ A director shall in relation to the financial institution in which he serves, stand
in a fiduciary relationship and shall in addition and without derogation owe the
financial institution and its shareholders the following duties:
� A duty to act honestly and in good faith;
� A duty to act in the best interests and for the benefit of the financial
institution;
� A duty to act independently, free from undue influence of any other
person;
� A duty to access necessary information to enable him or her discharge
his or her responsibilities.
� A duty to understand a directors¶ duties´
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Duty to exercise a reasonable standard of care and skillDuty to exercise a reasonable standard of care and skill
y Requires the Directors act carefully in carrying out their responsibilities.
y They must be prudent (standard of care is that expected of a knowledgeable
and skilled person´ managing their own business- (see Justice Katusi
comments in Ruling of Uganda vs David Jamwa) ±not of an ³ordinary man«´
y Directors must Keep informed and must make inquiries before decisions are
made.
y Keep abreast with the company affairs, industry trends and global activities.
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Exercise ³reasonable´ supervision and control over the
affairs and activities of the corporation
Special business acumen or expertise not necessarily
required
Not necessarily liable for errors of judgment
However, given events following financial crisis, will this
change?
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Duty of fair dealing
y Duty to conduct all transactions with the bank in a forthright and
fair manner that is fair to the interests of the Bank
y Directors should not take advantage of corporate opportunities
and should not engage in competition with the Bank.
y They should not to abuse of power or information
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Duty to act in good faith
y Act in the interests of the company, no personal profit.
y To act within their powers.
y To act solely in the benefit of the Principal (even in the case of
stakeholder representative Boards)
y Up hold qualities of loyalty
y Disclose conflict of interest situations
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� Board members hold alternative professional, business and public
responsibilities that could potentially influence their behaviour, conduct
and or thinking
� Management is constantly required to make decisions in a context of varied challenges, circumstances and expectations.
` A conflict of interest management framework is therefore imperative;
appropriate disclosure
formal / legitimate processes handle CoI in the best interests of the Bank(NOT OF THE STAKEHOLDERS)
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³³The legal framework and company chartersThe legal framework and company charters
((M emo & Arts)M emo & Arts) shouldshould not permit practicesnot permit practices(such as ³pre(such as ³pre--meetings´ and instructions onmeetings´ and instructions on
how to vote by shareholders whose voteshow to vote by shareholders whose votes
placed a director on the board) whereinplaced a director on the board) wherein
shareholders may limit the ability of directorsshareholders may limit the ability of directorsto exercise their duties to act in the bestto exercise their duties to act in the best
interest of the company and allinterest of the company and all
shareholders.´shareholders.´
Paragraph 90, OECD¶s White Paper onParagraph 90, OECD¶s White Paper onCorporate Governance in Latin AmericaCorporate Governance in Latin America
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o Board Charter setting out procedural rules
o Clarifies leadership roles and core responsibilities
o Reserves matters specifically reserved to board
o Sets management delegations and reporting arrangements
o Comprehensive induction for new directors
o Legal and regulatory obligations
o Financial structure of business, budgets and KPIs
o Understanding of strategic priorities and current status
o Familiarize with business operations, e.g. site visits
o Annual board work plan
o Meetings and budget cycle, annual reporting
o Code of ethics or statement of business principles
o Defines corporate values and conduct of staff and directors
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`
Do I believe I have all the information?` Have I the necessary skills to make this
decision?
` Do I have any conflict in this matter?
` Objectively, is this a rational business decision?
` Can I explain this in a transparent manner?
` Is it a responsible discharge of my duties?
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Boarddynamics
Boarddynamics
³Dynamics´ = Greek word for ³force´³Dynamics´ = Greek word for ³force´
(Oxford English Dictionary)(Oxford English Dictionary)
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o Generally, in terms of formal aspects of governance, there is usually no significant
difference between good and bad boards
o Directors attend meetings
o Board members are trained and experienced/professionals
o Ably appreciate and deliberate on business risk
o Independent directors on Board
o Board committees usually in place
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o But what then makes some boards and companies more functionally successful than
others in governance terms?
o Dysfunctional social systems within the company
o Intangible, immeasurable invisible factors
o Hence the quest for prudent management of ³Board dynamics´ .
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` Board dynamics is about social processes of interaction on the Board.
` These dynamics can be triggered off by:
x Personality traits ± e.g. facial expressions, appearance, manner of speech,
voice, dress, body language
x
Gender x Affiliations- social, professional, religious, political diversity etc
` And catalyzed by:
� Ego and sensitivities
� Fear, expectations, envy, complexity.
� Disparity of opinion, profession and other dispositions.
� Respect, trust and candor or lack of them.
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o Board size may influence Dynamics.
o too Small, limits range of inputs.
o too big, may divert focus
o Onset of Board Dynamics may be at induction organized for new directors , in the
course of latter interactions, upon acquisition of some information ±usually prejudicial
information etc;
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` The strength of the Board lies in its ability to incorporate many different,
sometimes, strongly held perspectives in making decisions
` It is critical to exploit and deploy these dynamics to benevolent cause.
` All dynamics that interfere with ability of the board to execute its mandate
must be faced and managed
Important to ensure that all members understand their roles
Avoid individual dominance
Encourage participation by all
Promote an open, trusting climate
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` Use outside resource/expertise if necessary to work through and establish
protocols for addressing sensitive and potentially contentious issues.
May help to enhance level of understanding and objectivity.
` At meetings, if there is a lot of tension and misunderstanding, briefly adjourn or
postpone contentious issue to allow for consideration of other perspectives and
seek more information.
` Be wary of the ³Group think´ syndrome!
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Groupthink is;
i. A phenomenon in which group members are so
committed to the group that they are reluctant to expresscontrary opinions.
ii. Members¶ striving for unanimity overrides their motivation
to realistically appraise alternative courses of action.´
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Symptoms of groupthink
Excessive optimism
An assumption of inherent morality
Suppression of dissent
An almost desperate quest for unanimity.
Do not rock the boat
It is okay not to talk about problems
Increased probability of poor decisions.
Debate is curbed
Escalation of Commitment.
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Escalation Of Commitment
A decision making trap where people get locked into losing courses of
action to avoid the embarrassment of quitting or admitting error.
You insist you are right even when you know you are wrong, because of
the sunk cost.
You have invested so much that you can¶t afford to lose.
You defend the indefensible.
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Challenges of group think;
Discussion and stressful interaction may be viewed as negative
Debate is curbed and silence is taken as consent
Compromise decisions may satisfy nothing.
Poor decision making
Unanimous vote can be wrong.
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Challenges of group think contd..;
Groupthink reduces dissent and opinion diversity.
� A Board without divergence of opinion is a dead Board!!
Intelligent policy makers can make incredibly unwise decisions.
No clear focus for decision responsibility.
Wasted resources.
How then can group members feel free to express their views knowing
that they conflict with those already expressed?
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Promote an open and honest climate
x cultivate an open, respectful interactive and mutual trust
relations across the Board and between the Board and
management
Urge members to be critical evaluators ±especially for all non-
minor decisions
Nurture devil¶s advocates to challenge assumptions /alternatives
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Question consequences of various actions.
Generate options, there are always alternatives.
Use objective criteria to decide.
Avoid ;
� isolation on the team.
� using the team to rubber-stamp predetermined
positions.
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o Avoid being too directive- it is good practice for the chair to withhold opinion
until all others have spoken.
o Regularly evaluate the functionality of the board
o
Align individual or personal attitudes and competences to supportfunctionality of the Board.
o Do not stereotype
o Arrange for direct reports from advisors and consultants
o Invite critics and or external experts to present their views
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o Separate people from the problem.
o Focus on interests, not positions.
³ focus on the fight in the dog, not the dog in the fight´
Create an effective Board culture!!
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Possible decision criteria
oOpportunity for corporate gain
oRisk of loss
o Availability of resources
oCost
oProfessional standards
oStatutory /regulatory compliance
oMarket value
oTime urgency
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Run meetings effectively, avoid the following ³time
Wasters´;
o Confirmation of previous meetings.
o
Matters arising.o Late delivery of Board Papers.
o Non-reading of documents.
o Substandard and poor quality of Board documents.
o AOB
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Sample Agenda1. Prayer
2. Apologies
3. Adoption of Agenda
4. Declaration of interest
5. Communication from the Chair 6. Adoption/Approval of minutes
7. Action Report from previous minutes
8. The CEO¶s update/Report-( sometimes not applicable)
9. Business of the meeting
10.Date of next meeting.
NB: AOB is discouraged.
If any issue is worth discussing, then list it on the Agenda!!
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o Balanced executive and non-exec. participation
o Effective selection process
o Key personal and professional attributes
o Skills aligned to business
o
Some general guidelineso Must have time to devote to responsibilities
o Must exercise judgment in best interests of the company
o Must be informed about the business, industry and the markets
o Must avoid interest conflicts between personal and business affairs
o Must treat board information confidentially not necessarily secretly!
o Should act objectively and be receptive to other perspectives
o Should prepare adequately for meetings and attend regularly
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o Dominant personality
o Hurried decisions based on inadequate data
o Serial restructuring, redeployment and resignation of key Executives
o ³do as I say, not as I do´
o The cover up spiral
o Interference with the information flow-focus on public reaction rather than issues.
o Poor communication dynamics (informal, indirect, incomplete, delayed etc)
o Always on the defensive modus operandi
o Forecast versus final results chronic/curious adverse variances
o ³No one is responsible´
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I n conclusionI n conclusion
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Beware of adversity of cliques
o Diversity per se is usually healthy and useful.
o Diversity may however generate its own negative dynamics-cliques can spring up
based on gender, profession , matrimonial status, age, language, ethnicity,
religious denomination, perceived/real differences in social standing etc
o Rivalry and Sabotage
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Exploit the strength from diversityExploit the strength from diversity
� Range of Competencies adds value.
� Diversity of thought enriches board deliberations.
� Healthy competition my enhance quality, etc.
� Broader perspectives for problem analysis.
� More knowledge, and alternatives are availed.
� Diversity clarifies ambiguity and reduces uncertainty.
� Participation fosters satisfaction and support.
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The board should understand its oversight role
o Board members should
o be qualified for their positions,
o have a clear understanding of their role in corporate governance and
o
be able to exercise sound judgment about the affairs of the bank
o Some responsibilities are unique to the banking sector:
o Promote bank safety and soundness
o Understand the regulatory environment
o Ensure that the bank maintains an effective relationship with
supervisors
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The Board of directors should approve and oversee the bank¶s
strategic objectives and corporate values, communicated
throughout the organisation
o Standards should address, among other things:
o Corruption
o Self-dealing
o Other illegal, unethical or questionable behaviour
o Employees should be encouraged to raise concerns about illegal or
unethical practices to the board or an independent committee without fear
of reprisal or retaliation- ³ whistle blower ³ framework
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Watch out for practices that could diminish the
quality of corporate governance. e.g.
Internal lending ( to officers, employees, board members or
controlling shareholders)
Preferential treatment for related parties and other favoured entities
Conflicts of interest
o T he board should ensure senior management implements effective
policies to prevent ( or limit) such activities
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The board of directors should set and enforce clear lines of responsibility and accountability throughout the organisation
o Role of the board:
o Define authorities & key responsibilities
o Oversee management actions
o Senior management¶s role:
o Delegate to staff & promote accountability
o Be responsible to the board for bank¶s performance
o Guidance also addresses:
o Accountability to Shareholders and of branches to Hqtr.
o Outsourcing of bank functions/strategic co-operations
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The board should ensure that there is appropriate
oversight by senior management consistent withestablished standards, policies and legal requirements
o Senior management should:
o Have the necessary skills to manage the business
o
Oversee line managers consistent with board policies ( but beware of folly of ³ micro-managing´ line managers)
o Under board¶s guidance, establish system of internal controls
o Apply the ³ four eyes´ principle, even in smaller branches
o Watch out for senior managers who are unwilling or unable to
exercise effective control over ³ star employees´
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The board and senior management should effectively utilise
the work conducted by the internal audit function, externalauditors and internal control functions
o Internal audits ± the board & senior management should:
o Recognise & communicate importance of audit & internal control
processes throughout the bank o Use the findings of internal audits and require timely correction of
problems by management
o Promote the internal auditor¶s independence, e.g. through reporting to
the board or board¶s audit committee
o Engage internal auditors to evaluate effectiveness of key internal controls
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The board and senior management should understandthe bank¶s operational structure, including where thebank operates through structures, that may impedetransparency (i.e. ³know-your-structure´)
o Banks sometimes employ structures, that lack or impair transparency
o T his sometimes occurs for legitimate business purposes «
o But doing so can:
o Pose significant financial, legal and reputational risks for the bank
o Impede board and senior management oversight
o M ake it more difficult for authorities to effectively supervise the bank
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� Risks should be appropriately assessed and managed
� Information regarding the activities and risks should be easily available at the bank¶s
head office & reported to the board and bank¶s supervisors
� Clear policies and procedures should exist for the identification and management of
material risks
� Regularly evaluate the need to use structures that reduce transparency.
� Set clear corporate governance expectations for all relevant entities and business
lines
� Assess compliance with applicable laws and internal policies
� Activities should be subject to enhanced audit procedures and internal control
reviews
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TAKE HOME: Self TAKE HOME: Self
assessment of your assessment of your
corporate governancecorporate governance
structure against the FIAstructure against the FIA
20042004
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` Section 4(2)(j)
The BOU shall supervise, regulate, control and
discipline all financial institutions......´
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Pr i i ir t ti
Section 52 Board of at least five directors headed by non-
executive director
Directors must pass a fit and proper test (Schedule
3 of the Act)
Section 53 Directors must be approved by the central bank
Section 54 Directors shall not take part in a discussion or
decision here they have a conflict of interest or
any of their related interests have an interest
Section 55 he Board is responsible for ood corporateovernance and business performance
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� the Central Bank shall have regard to
� general probity
� Competence and soundness of judgment
� Diligence
� Whether the interests of the depositors or potential
depositors are likely to be threatened by that person
holding the position of director.
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` the Central Bank shall also consider any evidence that:
� The person has been convicted of an office regarding fraud or other
offence of which dishonesty or violence is an element;
� Has contravened any law designed to protect the public from
financial fraud;
� Was a director of an institution that has been liquidated;
� Has taken part in any business practice that ³in the opinion of the
Central Bank was deceitful, oppressive, fraudulent, prejudicial or improper or reflects discredit on his/her business conduct
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Pr i i ir t ti
Section 55 Board is in full control of the affairs and business
operations of the Bank
Board ensures that the business of the Bank is
carried out in compliance with all applicable laws
and regulations and is conducive to safe and soundbanking practices
Ensures reporting to shareholders at the AGM
Ensures that internal controls and systems and the
management information systems do the following:
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Pr i i ir t ti
Section 55 - Designed to provide reasonable assurance as to
the integrity and reliability of the financial
statements of the Bank and to safeguard, verify
and maintain accountability of Bank assets;
- Based on established and written policies andprocedures;
- Implemented by trained and skilled officers with an
appropriate segregation of duties;
- Continuously monitored, reviewed and updated by
the Board to ensure that no breakdown occurs
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Pr i i ir t ti
Section 55 The directors shall appoint from amongst
themselves 2 executive directors:
- Resident in Uganda;
- ave no ledge of the manner in hich the
an ¶s longer strateg is pursued in practice and
have the a ilit to influence its policies;
- le to effectivel direct the usiness of the an .
- ppl the ³Four-e es´ principle
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Pr i i ir t ti
Reg. 6 Board to establish strategic objectives and
corporate values that have been communicated
throughout the Bank
One of the values is the importance of having timely
and frank discussion of problems and theprohibition of corruption and bribery in Bank
dealings
Board should ensure that Management does not
operate as to diminish the quality of corporate
governance
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Pr i i ir t ti
Reg. 6 Clear demarcation of responsibilities of the board
and management
Board together with CEO to develop a position
description for the CEO defining limits to
management¶s responsibility
Board to approve the corporate objectives which
are entrusted to the CEO and basis for measuring
the CEO¶s effectiveness in achieving these
Board to perform annual performance evaluation of
CEO
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Pr i i ir t ti
Reg. 6 Board to ensure that directors are qualified for their
positions and have a clear understanding of their
role in corporate governance and are not subject to
undue influence from management or outside
concerns At least 5 of the directors possess demonstrated
expertise and experience relevant to the functions
of the Bank
Not more than 50% of the directors to be
employees of the Bank or any of its subsidiaries or
affiliates
Orientation program for all new directors and
refresher programs
Board to perform annual performance evaluation of
CEO
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Pr i i ir t ti
Reg. 6 Board receives on a timely basis, sufficient
information to judge the performance of
management and assess the quantitative
performance of the Bank
Board meetings are held at least once every quarter
hairperson ensures that clear and complete
minutes of Board meetings are circulated to the
Board
o director is serving simultaneously on the board
of another financial institution
Board to ensure that there is appropriate oversight
by senior management
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Pr i i ir t ti
Reg. 6 Board to formulate clear policy on risk management
and to recognize the importance of the audit
process
Board and senior management to take measures to
enhance the independence of the internal auditor Board and senior management utilize in a timely
manner, the findings of internal and external
auditors
Board and senior management engages external
auditors to judge the effectiveness of internal
controls
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Pr i i ir t ti
Reg. 6 Board approves the compensation of senior
management and key personnel
Salary scales should not overly depend on short
term performance
Feedback from stakeholders is properlydocumented and procedures have been established
to deal with concerns
Reg. 7 Board to establish specialized committees of
directors for in-depth review of issues
Board Committees to include Audit Committee, Asset Liability Management Committee, Risk
Management Committee, Compensation Committee
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Pr i i ir t ti
Reg. 7 Audit Committee to constitute at least 2 directors
who are NEDs
RMC to provide oversight of the senior
management's activities in managing credit, market,
liquidity, operational, legal and other risksCompensation Committee provides oversight on
remuneration of senior management and other key
personnel consistent with the Bank¶s culture,
objectives and strategy
Appointment of internal and external auditors