Session 2:

BUILDING EFFECTIVE AND EFFICIENT

BOARDS

Indonesian Entrepreneurs 
Organization

Corporate Governance Workshop
October 2015

Board Effectiveness:  What Should be Considered?

Board Effectiveness

Board Structure &  Board Roles &  Board Functions & 

Composition Director Duties Behaviors

 Proper committees are in place   Board discussions are candid with full 
 Board’s role is clearly defined vis‐
(e.g., audit, remuneration,  vetting of issues.
à‐vis management 
 Board challenges management 
nomination)  Board understands its oversight 
 Board size is optimal effectively on issues.
duties  (esp. Risk & Control) and 
 Boards to include appropriate   Board working procedures are 
has appropriate processes in 
mix of executive, non‐executive  effective (e.g., meeting proceedings, 
place
frequency, formality)
and independent directors   Directors understand duties and 
 Board possesses the optimal   Board conducts routine self‐
responsibilities to the company 
mix skills evaluations of performance
and shareholders
 Board offers routine training to 
directors

What common challenges exist in each Category?

1
Common Board Challenges Observed

Shareholders
Board acts as a ‘Paper’ board Composed of family & insiders Lack of Financial & Risk ‘literacy’

Informal working procedures Board of Directors Narrow focus on financials only

Audit Other
Risk (Nom, Remun.,etc)
No or ineffective sub-committees Uninformed board – poor Mgt information
No clear division btwn Board & Mgt
Management
Operations
Internal External
Audit Audit
Financial & Admin Management

Risk Management

Internal Control

Shareholders

Board Roles Board of Directors

Management

2
What Type of Board  Do You Have?
Low Involvement High Involvement

The Passive The Certifying The Engaged The Intervening The Operating

Board Board Board Board Board

 At discretion of   Certifies to SHs   Provides insight,   Intensely   Makes key 

the CEO that CEO meets  advice &  involved in  decisions that 
expectations support to  decision‐making  mgmt. then 
 Limited activity 
mgmt. around key  implements
& participation  Takes corrective 
issues
action only as   Understands its   Fills gaps in 
 Limited 
ultima ratio responsibility to   Frequent &  mgmt. 
accountability
oversee mgmt.  intense  experience
 Understands 
 Ratifies mgmt.  meetings, often 
role of ind.   Guides & judges 
preferences on short notice
directors the CEO
 Informed about   Has right skills 
CEO’s  mix to add value Source: HBR, David A. Nadler, 
performance Building Better Boards
 Define roles and 
 Establishes a  responsibility of 
succession plan board vs. mgmt. 

Board’s Role Overview

Oversight Value Creation
Risk  Risk management Strategy
oversight formulation

Financial  Control/monitor  Internal/external audit  Approval of investments, mergers 

Oversight performance policies and acquisitions

Ethics/Duties Create code of conduct (e.g.  Protection of 

values,behavior, conflict resolution)  shareholder rights

Human  Evaluation of management  Compensation  Approval of HR  Succession

Resources performance guidelines policies planning

Organization Basic organizational design (e.g. dominant axis of management, 
relations between holdings and subsidiaries)

Board Board roles, Board policies,  Information needs Board calendar, 

Structures committees proceedings Reporting lines Meeting  agendas

3
 Board Balancing Act

Expectations of the society

Drive for shareholder value
for corporate responsibility

Micromanagement
Mode of CEO exit Detachment

Risk taking Tight financial control

Local cultural framework in Global economic

globalizing markets framework

Board vs. Management
What role does Board play vs. Management?
How do we define Corporate Governance?
Mgt Performs;  Mgt Performs; Board  Board Performs;  
No Board Involement Oversees (and Approves) No Mgt Involvement

1 5 10
1. Setting Strategy
Shareholders
2. Resolving Administrative Matters

3. Managing Risks Board of Directors
4. Hiring Staff

5. Nominating Directors
Management
6. Preparing & Disclosing Financials

7. Making Investment & Operational Decisions

8. Setting Senior Executive Compensation

4
Draw a Clear Line Between Board and Mgmt. Duties
For example
How do we define Corporate Governance?
Management: Board:
 Develops/recommends strategic   Approves strategic direction
direction
 Develops/recommends business   Approves business plans and 
Shareholders
plans and budgets budgets
 Develops effective executive board   Organizes work of the board
or mgmt. team Board of Directors
 Carries out corporate activities to   Monitors and guides managerial 
achieve corporate strategy and  performance
business plans Management

Nose In – Hands Out!

Real Scenarios:  Board Role & Operational Decision‐Making
How would you handle these situations?
1. The Chairman of the Board of ABC Company requires the CFO to 
send him all checks to be signed by him and he must sign off on 
all new hire positions.
2. During the year, the CEO circulates numerous written 
resolutions  for the board directors to endorse key decisions 
taken by the Chairman and key executives.
3. The Chairman has asked to modify the company Articles to 
setup an Operations Committee which has the power to make 
key decisions on behalf of the board it deems necessary, in 
order to make more efficient decisions.
4. The Audit Committee of this company met 40 times during the 
year, to increase focus on internal audit issues.

5
Sample Authority Matrix
Board ‐  Audit  Investment 
No. Authori ty AGM General Committee Committee CEO Management

How do we define Corporate Governance?
A. General Corporate Authorities

A.1 Ame ndme nts  to a uthori ze d s ha re  ca pi ta l x

De ci di ng on ma jor a cqui s i ti ons  a nd di ve s ture s  of othe r 
A.2 x
e nti ti e s
A.4 Publ i c offe ri ng of s ha re s  for BoP x
A.5 Obta i ni ng de bt fi na nci ng x (>$) x (<$)
A.8 Sha re  a cqui s i ti on a nd e qui ty pa rti ci pa ti on i n othe r e nti ti e s i nform x
A.10 Approva l  of a nnua l  re port a nd a ccounts
Shareholders
x re comme nd
A.11 De ci s i ons  on di vi de nds  a nd ne t profi t a l l oca ti ons i nform x
A.13 Ame ndme nts  to BoP's  Arti cl e s  of As s oci a ti on or By‐La ws x
A.15 Appoi ntme nt of Boa rd of Di re ctors  Me mbe rs x re comme nd
A.16 Appoi ntme nt of Cha i rma n, De puty Cha i rma n
Board of Directors
x
A.17 Approva l  of fe e s  for Di re ctors x re comme nd
A.20 Appoi ntme nt a nd re mune ra ti on of Exte rna l  Audi tors x re comme nd re comme nd
B. Operational Authorities

B.2 Approvi ng corpora te  s tra te gy x

B.4 Re vi s i on  or re a l l oca ti on of a nnua l  budge t Management
x (>$) x (<$) x (<$)
B.5 Approva l  of uni t s pe ci fi c pl a ns  a nd budge ts x x
B.12 Approva l  to pa rti ci pa te  of ne w de ve l opme nt proje cts x (>$) x (<$) x (<$)
B.21 Approvi ng Inve s tme nt Tra ns a cti ons x (>$) x (>$)
B.23 Approvi ng HR pol i ci e s  a pprova l s  a nd fra me works x
B.26 Appoi ntme nt of othe r non‐Se ni or Ma na ge me nt s ta ff x x
B.27 Re mune ra ti on of CEO a nd Se ni or Exe cuti ve s x x
B.33 Cha nge s  a nd i nve s tme nts  to IT s ys te ms x (>$) x (<$) x (<$)
IFC Corporate Governance Success Stories, MENA, 2010

Scenario:  Chairman’s Role
How do we define Corporate Governance?
Mr. Saeed and his family own 80% of Company X.   When asked 
about his role as Chairman/CEO, Mr. Saeed said: 

Shareholders
“My board serves me well and helps me make important decisions 
for my bank.   I handpicked all members of my board and they’ve 
become very close friends. This makes board meetings run very 
Board of Directors
smoothly, since they can agree to my decisions quickly and move 
on.  There is rarely any dissent – I emphasize everyone being on 
the same page.  In fact, sometimes I can avoid unnecessary 
Management
meetings by simply making a few phone calls for a decision.”

6
Chairman vs CEO Role
The Chairman should
• Ensure that the board is engaged and
committed via strategy formulation
• Chair at board and shareholders
meetings; set the agenda, facilitate
constructive deliberations (& dissent)
• Involve all directors in discussions and
decision making
• Take a lead role in determining
governance structures and processes
• Ensure the board receives proper
information
• Ensure links between board,
shareowners and stakeholders
• Draw clear line between board and
management responsibilities
Shareholders
Board’s Role in Strategy
Board of Directors
Management
The CEO should
• Ensure that the company as a whole
is running with motivated staff
• Oversee operations of organization,
manage human and financial
resources
• Formulate policies and planning
recommendations with the board
• Support board by providing timely
information and interfacing between
board and staff
• Ensure link among company,
community and stakeholders
• Draw clear line between boards and
management’s responsibilities
7
Real Scenario:  Strategic Decisions
How would you handle these situations?
How do we define Corporate Governance?
Maxim Plastics Company has been seeking to expand into other 
Asian countries due to their recent success in their home country.   

The Chairman/CEO, Mr. Frank, happily reported to the board at a 
Shareholders
recent meeting that the company had purchased a 20% stake in a 
Foreign Bank.  Board of Directors

Mr. Frank explained the Foreign Bank was desperately seeking 
capital and so he was offered  a great price that he could not refuse.  
Management
So he decided to make the purchase.  

When one board member objected to the decision, Mr. Frank said he 
had consulted with the Executive Committee for their advice before 
the purchase.  

Board Role in Strategy Formulation

Deliberate & Approve

Strategy
Set tone at the top

Approve
Revise, Adapt as Policies
needed
Proactive
preferable to
Reactive
Clarify roles &
Oversee responsibilities
Progress

Monitor developments
and key indicators

8
Red‐Flags on Board and Strategy

 Strategy and internal capacity do not correspond to one another

 Functional, business and corporate strategy do not feed into one

another

 High productivity, poor performance

 Strategy has not been on the agenda for 6 months

 Major change in external factors does not lead to change strategy

proposals by the management

Shareholders

Director Duties Board of Directors

Management

9
Real Scenarios:  Director Duties
How do we define Corporate Governance?
1. When interviewing a senior board member for this bank, he indicated that 
his primary interest as a director is to obtain favorable terms on loans for his 
other businesses.  He said he is one the bank’s biggest customers.

2. Shareholders
A board member represented a 30% shareholder in this company and 
indicated that his primary duty as a board member was to look after his 
investment.
Board of Directors
3. A board member was appointed to the board by her family, which holds a 
controlling interest of this company.  She attends meetings once/year, but 
often votes via written resolution according to her father’s (Chairman) 
Management
instructions .  

4. This board member represented a 20% investor.  He and his other colleagues 
who work for the 20% investor rotate attendance at the board meetings.  

Sample Director Duties:  Important Directors
Understand & Commit to These
How do we define Corporate Governance?
1. The director shall fully understand the Board’s roles  5. The Director shall commit adequate time to the 
and responsibilities as identified in the Board  position…
Charter... 6. The Director shall ensure maximum 
2. The Director shall fully understand the corporate  contribution of his/her knowledge, skills, 
governance and ethics policies of the company… expertise, abilities, and professional 
3. The Director shall exercise fully duty of loyalty to the  resources...   
Shareholders
company, by NOT:  7. The Director shall fully participate in Board 
‐ Conducting transactions in which they have a personal  discussions by ensuring that he/she gives full 
interest; Disclosing confidential information; Entering  consideration and depth of analysis to issues…
into contractual relations with a competing company; 
Board of Directors
8. The Director shall ensure objectivity of analysis 
Using assets and facilities of the Company for personal 
benefit/gain;  Using information and business 
promoting long‐term interest of company …
opportunities received in their official capacity for  9. The Director shall ensure that he/she takes 
personal gain individual responsibility to stay educated and 
4. The Director shall exercise full duty of care to the  informed …
company, including:
Management
10. The Director shall voice concern to the 
‐ Acting honestly in the interests of the Company;   Chairman or other members as appropriate, if 
Displaying maximum care and prudence that may be  he/she feels that any of the terms discussed in 
expected from a good manager in a similar situation  these TORs are not being realized…
and under similar circumstances;  Ensuring that the 
Company acts in compliance with all applicable laws 
and regulations; Requesting sufficient information from 
management to enable him/her to make balanced 
decisions.

10
The Role of Directors
 Strategy: constructively contribute to and challenge management’s 
development of strategy

 Performance: scrutinize the performance of management in meeting agreed 
goals and objectives and monitor the reporting of performance

 Risk: ensure that financial information is accurate and that financial controls 
and systems of risk management are robust and defensible

 People: determine appropriate levels of remuneration of executive directors.  
Take a prime role in appointing, and where necessary removing, senior 
management and in succession planning

Source: Higgs Report, UK

21

Can You Answer the Following?
 What is my specific value adding contribution to the board?
 What is the specific and unique value of the board?
 Do I know intimately the business model and the key value 
drivers?
 Do I update myself regularly – beyond preparation for the 
individual session ‐ on industry and technology trends, 
competitors’ strategy and regulatory changes?
 Do I know what shareholders and important stakeholders expect 
from me as a board member?
 And – last but not least – does this board work give me personal 
satisfaction, learning opportunities and a chance to make a 
difference?

22

11
 Shareholders

Board Composition Board of Directors

Management

Board composition – Primary functionaries

» EU commission definition: Any member of the administrative body who is

engaged in the daily management of the company
Executive Director » OECD definition: A board member who holds a senior management position,
with full board responsibilities

» EU commission definition: Any member of the administrative body of a

company other than an executive director
Non‐executive  » OECD definition: A board member who does not take part in the day‐to‐day
Director (NED) operations of the company, and is not an employee of the company
» An NED may or may not be independent (example a former CEO is an NED
but cannot be considered as independent)

OECD definition: A non‐executive board member who:

» Has no material business or contractual relationship with the bank
Independent 
» Is not under the undue influence of any other board member or group of
Director
shareholders
» Is generally capable of acting in an informed and objective manner

12
Sample Independence Definition
Independence criteria (from UK Combined Code): 
How do we define Corporate Governance?
The individual would not be considered independent if he/she: 

 has been an employee of the company or group within the last five years;

 has, or has had within the last three years, a material business relationship with the 
Shareholders
company either directly, or as a partner, shareholder, director or senior employee of a 
body that has such a relationship with the company;
Board of Directors
 has received or receives additional remuneration from the company apart from a 
director’s fee, participates in the company’s share option or a performance‐related pay 
scheme, or is a member of the company’s pension scheme;
Management
 has close family ties with any of the company’s advisers, directors or senior employees;

 represents a significant shareholder; or

 has served on the board for more than nine years from the date of their first election.

What Value Do Independent Directors Add?
• Help ensure a professional member with the right qualifications, 
How do we define Corporate Governance?
skillsets, and commitment is appointed.

• Help ensure that situations  are assessed openly and objectively and 
Shareholders
bring an unbiased view to board deliberations.  

• Are able to act in the best  interest of all shareholders (and not just the 
Board of Directors
one it might represent). 

• Help ensure the long‐term interests of the company are being 
Management
considered (and not being influenced by the potential near‐term 
strategy of one or two particular shareholders).

• Provide assurance to minority shareholders that their views are being 
represented (and the directors are not just representatives of major 
shareholders).

13
 What CG Challenges Might Exist
for SAFECO?
How do we define Corporate Governance?
SAFECO Ownership Structure SAFECO Board Composition
20%:  INVESTOR B 8 TOTAL BOARD MEMBERS
70%:  INVESTOR A
1 Chairman/CEO Representative of  INVESTOR A
10%:  OTHER 
INVESTORS 4 Non Execs from INVESTOR A 
Shareholders 1 Non Exec from INVESTOR B
2 Other Executives (CFO, COO)

Board of Directors
for SAFECO?
SAFECO Board Structure
Audit  & Risk Committee Management Executive Committee

Management CFO Includes 2 more Execs not on Board

Makes Key Operational Decisions
SAFECO Mgt Level:  Internal Audit
Chairman/CEO
CFO

Internal Audit

Board Composition
How do we define Corporate Governance?
What skills might be crucial for this Company?

A mid‐size Vietnamese plastics company is seeking to expand into 
China and other parts of East Asia.   
Shareholders

It also seeking to diversify its products from consumer plastics (e.g., 
food containers) to industrial plastics (for vehicles and 
Board of Directors
machinery).   

Management
They are seeking investors to fuel their growth – including equity 
partners.  They are also considering going public in the next year.

The board currently consists of two brothers who control the 
company, plus one family friend.

14
 Board Composition
Client Example 1 – Family Dominated

Executive/
Director Family/ Friend Background Shareholding
Non-Exec
Director 1
Non-Executive None Banking 0.2%
Chairman
Director 2
Executive Family Garments 31.9%*
CEO – Family Patriarch
Director 3 Executive None Banking None
Director 4 Non-Executive Family Friend Construction Company 4.1%
None –but
Director 5 Non-Executive None Banking affiliated with
17% SH
Director 6 Non-Executive None General Business 4.9%

Director 7 Non-Executive Family General Business 8.9%*

Director 8 Non-Executive Family Friend Logistics Company 0.2%

Director 9 Non-Executive Family Friend Non-Banking 0.6%

Director 10 Executive Family Tourism; Restaurant 5.4%*

Director 11 Executive None Accounting None

 Private EAP Bank seeking equity investors
 58% owned by one family; Ultimate beneficial ownership 
unclear
 8/11 directors are Family/Friends or Execs

Board Composition
Client Example 2 – Key Person Risk
Executive/ Non‐Exec/  Family Share‐
Director Role Age
Independent Relation holding %
Director 1 ‐ Chairman Independent Board Chairman ‐ 83 .05%
Director 2 – CEO Family  Main Family 
Executive CEO 54 2.9%
Patriarch Shareholder
Board Vice‐
Director 3 Independent ‐ 83 .14%
Chairman
Audit Committee ‐
Director 4 Independent ‐ 75 ‐
Chairman
Director 5 Independent Audit Committee ‐ 76 ‐

Director 6 Independent Audit Committee ‐ 69 ‐

Brother‐in‐
Director 7 Non‐Executive Member 66 .05%
Law to CEO
Director 8 Executive Senior VP ‐ 64 .05%

Director 9 Executive CFO Wife of CEO 53 1.56%

Director 10 Executive Senior VP Sister of CFO 61 .01%

 Public EAP Company seeking equity investors; meets listing requirements
 76% owned by one family via family investment companies
 Board meets quarterly; but only very high‐level engagement; Key‐Person Risk

15
Considerations for Board Composition
How do we define Corporate Governance?
Type: Executive  ‐ Non‐Executives ‐ Indpedendents

Experience: Industry – Geographical ‐ Market

Shareholders
Subject Expert: Financial ‐ Risk ‐ Legal ‐ Other
Board of Directors
Personal Attributes: Leaders – Tacticians

Diversity: Age – Gender ‐ Cultural

Management

View Points: Risk Adversity – Differing Perspectives

Other Value Added: Business Contacts – Reputation

Board Composition Considerations
Ask Yourselves…
Sample Board Composition – Closely Held Company
How do we define Corporate Governance?
1 Chairman/CEO from MAJORITY INVESTOR
2 Non Execs from MAJORITY INVESTOR
2 Executives
Shareholders
 Do we have the right skillsets/expertise to guide strategy into new markets/products?
 Is there adequate separation between the board and management for proper oversight?
 Are interests of other investors represented?
 Board of Directors
What signal are we sending to the market/potential investors/stakeholders?
 Would more diverse perspectives improve our decision‐making, strategy formulation?
 Are we structured for long‐term sustainability (i.e., not centered on 1 or 2 individuals)?
Towards an Improved Composition…but no one right answer!
Management
 Independent Chairman
 Strong Industry, Finance Expertise
 Proper independence/objectivity ‐> minority SH views
 Collective experience in diverse markets/products
 Proper balance between Executives/Non‐Executives
 Facilitates proper committee composition

16
Survey of Board composition at Large Banks
after the Financial Crisis
How do we define Corporate Governance?
Board Board
#New NEDs  CEO/Cha Independen Former CEO 
Bank  size  size 
added ir split?  t Chair on Board
2007 Current
Bank of America 17 15 8 Y Y N
Barclays 16 13 Shareholders
3 Y Y N
BNP Paribas 15 14 1 Y N Y (as chairman)
Citigroup 13 17 8 Y Y N
Board of Directors
Credit Suisse 13 14 3 Y N (new chair) N
Deutsche Bank 20 20 3 Y N N
Goldman Sachs 12 12 2 N N/A N
Management
HSBC 18 21 7 Y N Y (as chairman)
JP Morgan Chase 12 11 0 N N/A N
Lloyds Group 14 14 5 Y Y (new chair) N
Morgan Stanley 12 14 2 Y N (new chair) Y (as chairman)
RBS 16 12 7 Y Y (new chair) N

Shareholders

Board Dynamics Board of Directors

Management

17
Real Scenario:  Board Dynamics & Decision‐Making

How would you handle the situation?

 Consortium of four strategic investors (combined 70% ownership) each have board appointee
 Those four dominate the board decisions, often meeting beforehand to take a decision.
 Chairman is long-time friend of one consortium member and defers to them.
 Each committee has at least 2 consortium members.
 CEO is brother of one Consortium board member.

Total Board Size 7 members

SH Consortium (70% ownership) 4 members

Real Scenario:   Ineffective Board Members
How would handle the situation?
Current Board Structure Observations
Executive  / Non‐
Name Representing
Executive  The Wives feel they
cannot contribute due to
Chairman Executive Family their husbands
CEO Executive Shareholders
Family  Investor A usually does
not attend or just sends
Vice‐Chairman Non‐Executive Family one person
Board of Directors
Wife Chairman Non‐Executive Family  Investor B sends
different people each
Wife Vice‐Chairman Non‐Executive Family time
Investor A Appointee Non‐Executive
Management
Investor A  Most decisions made by
Chairman and CEO
Investor A Appointee Non‐Executive Investor A

Investor B Appointee Non‐Executive National Bank

Investor B Appointee Non‐Executive National Bank

18
 Shareholders

Board Committees Board of Directors

Management

Common Committees
 To provide financial oversight and ensure for appropriate control structure
How do we define Corporate Governance?
Audit   Board chairman not a member; nor are executives; Should consist exclusively of independent
directors
Committee  Focus Areas:
 Accounting issues and policies; review of financial information
 Risk management, internal controls and audit procedures
 External audit issues and report
 Shareholders
May also consider legal matters and compliance

 To ensure for appropriate board composition.
 Ideally, all independent; at minimum, chairman independent, remaining directors non‐
Nominations  Establishing an Audit Committee
Board of Directors executive
 Focus areas:
Committee  Nominations: Chooses the candidates for director and CEO; reviews and approves other 
senior appointments
 Evaluation and training: Organizes or carries‐out board evaluation; conducts performance 
Management
appraisals of directors and senior management
 Succession planning: For CEO, chairman and other key directors.
 Increasingly handles “corporate governance” issues

 To help set remuneration policy and structure to attract, retain and motivate directors
 Composition: Ideally, all independent; at minimum, chairman independent, remaining 
Remunerations  
directors non‐executive
Focus areas:
Committee Considers matters relating to non‐executive and executive remuneration
Approves changes to incentive and benefits plans applicable to senior managers

19
 Audit Committee – A must for almost all companies
Roles and responsibilities

» Appoints the external auditor and oversees the company’s relation with them
» Recommends the audit fee to the Board and approves any non‐audit services
Relationship with 
provided by the external auditor
External audit » Discusses with the external auditor, the nature and scope of the audit and
reviews the auditors quality control mechanisms
» Monitors and reviews the activities of internal audit
» Ensures that the Internal audit is adequately resourced and has sufficient
Internal audit 
standing within the company
function » Maintains the independence of IA and provides necessary resources
» Considers management response to IA recommendations
Internal control 
» Maintains a comprehensive Internal control (IC) framework
and risk 
» Ensures the presence of a risk management policy document
management
» Reviews significant reporting issues and accounting policies
» Reviews company’s semi‐annual and annual financial statements
Reporting and  » Reviews formal announcements made to the shareholders
ongoing review » Reviews primary regulatory returns filed and disclosures made by the
company
» Reviews the going concern assumption of the company
Note: Details on the composition, membership of the Audit committee detailed under the session on Audit committee

Supervisory Board vs Audit Committee
What are Pros and Cons of each?
Board of Directors
Supervisory Board
VS.
Audit Committee (Inspection Committee)

 Consists of BoD Members only  Appointed by and reports to 

 Part of BoD and reports to BoD Shareholders
 Oversight of:  Supervise the financial situation of 
the company, legality of activities.
»External Audit
»Internal Audit
»Financial Reporting
»Internal Controls/Risk Mgt
Audit
Committee

20
 Real Scenario: Committee Structure
What concerns would you have?

Board of Directors

Audit Committee

4 Members
 2 Non‐Executive appointed by Majority Shareholder
 1 CFO HR/Nominations/
 1 Head of Internal Audit Remuneration
Committee
 Non‐Execs have investment experience
3 Members
 1 Non‐Executive appointed by Majority 
Shareholder
 1 CEO
 1 Head of Human Resources (not a board 
member)

Real Scenario:  Group Governancerporate Governance?
What concerns would you have?
Holding Company Structure

Saeed Holding Company Board
100% Saeed
5 board members
Family Mr. Saeed Chairman
SHC Audit
Committee Shareholders
4 CEOs of Each Subsidiary (Saeed Family)

Saeed Construction 
Board of Directors Saeed Car 
Saeed Insurance Saeed Trading Co
Company  Dealer Company
Similar Board Members
3 members from Holding 
board plus the
CEO

40% Saeed Holding Co.
30% Mr. Saeed
Audit 30% Various Investors
Committee Same Members

21
Real Scenario: Special Committees & Board Authority
How would you handle the situation?
Board (5 members) 
4 SH Reps; 1 Exec
Audit Strategy
Committee Committee

Executive Committee (5 members)
 2 SH Reps – same as board (60%, 20% ownership 
resp.)
 1 Outside Advisor (non‐SH)
 2 Executives (CEO, CFO)
 Meets bi‐weekly ‐ Monitors performance & Makes 
key operational/strategic decisions
Management
Units Units Units Units
Units Units Units Units

Real Scenario: Special Committees & Board Authority

Sample ToRs from an Investment Committee
1. The Board of Investment consists of a maximum of (5) members:
a. The Company's Chairman;
b. The Company's General Director;
c. Other members from the BoD or Executive Management as assigned by the Chairman.
2. The Chairman of the Board of Directors is also the Chairman of the Board of Investment.
3. The Board of Investment has the authority to decide the following issues:
a. Investments which are not within the business plan and budgets approved by
the AGM, with investment value up to the maximum of 50% of total assets' value
recorded in the latest financial statements;
b. Capital contribution, invest in or divest from enterprises, with investment value up to the
maximum of 50% of total assets' value;
c. Annual Capital Expenditure Plan and/or fixed assets serving the ordinary business needs.
d. Company borrowings with value up to the maximum of 50% total assets' value 
e.  Other contracts and agreements not within the authority of the General Shareholders' Meeting or 
Board of Directors
4.  Decision by the committee must include the Chairman’s vote.

22
 Shareholders

Board Procedures Board of Directors

Management

Corporate  Secretary – Ensuring Board Efficiency
The professional corporate secretary can help
The duties of the corporate secretary
How do we define Corporate Governance? the board:
Resolves organizational
matters for board meetings  Work at its highest level of efficiency, by
Explains the procedural
introducing best practice working
requirements of laws, the Notifies all directors of board procedures
charter and by-laws of the meetings
company
 Identify gaps in corporate governance
Shareholders matters and propose ways to address such
The
Conducts induction Communicates to and
weaknesses
trainings for newly Corporate collects voting ballots
elected directors Secretary from directors  Assist in establishing and maintaining clear
Board of Directors communication between the various
governing bodies of the company in
compliance with the company’s articles,
Establishes templates for
Ensures compliance with the charters, and other internal regulations
preparing board papers &
board procedures
presentations
Takes the minutes of
Management  Ensure that the governing bodies follow
board meetings existing internal corporate rules and
policies, and change them, or institute new
ones, when appropriate

 Ensure that the governing bodies adhere to

all relevant regulatory requirements, both
domestic and possibly foreign

23
 Board Procedures
How do we define Corporate Governance?
Review board procedures (e.g., meeting proceedings, frequency, 
formality)

 Set a formal agenda – reactive & proactive issues
Shareholders
 Utilize briefing papers for efficiency & efficacy
 Consider appropriate meeting frequency and length
Board of Directors

 Take and approve formal Minutes
Management
 Take care to facilitate discussions to fully vett issues

 Consider full‐year program to ensure topics are addressed 
proactively
 Ensure adequate time spent on the right topics

Simple Procedural Suggestions
Before the board meeting After the board meeting What to expect between meetings
• Ensure there is a process whereby • Copy of the draft board minutes  • Send out monthly/bi‐monthly “flash” report 
 Directors are offered an opportunity to  for comment within 10 days of  highlighting (could be based on company 
comment on the draft agenda;  and meeting scorecards)
 Directors receive the final agenda and   Key financial indicators
meeting papers at least five business   Key operational statistics and information
days before the meeting. • Finalized board minutes as a 
record of the proceedings [but   Information on any deviations from 
generally only approved by the  budget, forecasts, etc.
• Directors should have regular and free access  board at the next meeting]
to the board Chair in the first instance, and in   Summary of major highlights/events in 
discussion with him/her may then be directed  past month
to the CEO and/or corporate secretary • Action log summarizing key   Indication of progress of action log since 
decisions taken at meeting,  previous board meeting
• As needed, hold separate sessions with non‐ actions to be undertaken in  • Include summary cover report from CEO 
executive and/or independent board  regard to decisions and  indicating any important issues for board’s 
members immediately before or after the  responsibilities for the execution  consideration and providing a short “state of 
meeting to offer a forum to voice any  of the actions the nation” summary of operational 
concerns about board functioning or  performance to date and any industry 
dynamics. developments that are substantively relevant
• Timetable or targets for execution 
of agreed actions/decisions • Copies of any media coverage on the 
• Develop an Annual Board Plan which lays out  company and/or industry that might require a 
the tentative schedule of meetings (including 
committees) and key topics to be addressed  note from CEO to put the issue/s in context of 
over the course of the year (which of course  current operational performance or strategy
will be supplemented with other timely issues  • Copies of any reports by industry experts and 
as needed).  This will add structure and ensure  investment analyst reports of company 
the board doesn’t lose sight on major items it  and/or its competitors 
should focus on (e.g., Strategy, Org 
Development issues, CG Evaluation, etc). • Information on any major developments in 
the market and implications for the board 
and/or company e.g. new laws or regulations, 
corporate governance issues, etc

24
 Good Practice:  Develop a Board Calendar
Sample Board Calendar

49

Board Work Plans – Good Tool to Improve
Committee Functioning
How do we define Corporate Governance?
Sample from Audit Committee Work Plan
Responsibility How? Committee Tasks Frequenc Timeline
y
A.  Review bank’s  The AC will form an opinion on the A1. Review annual plan of internal & Annual
Internal Control  state internal controls in the Bank external auditors.
systems based on internal audit and
external audit reports. TheyShareholders
will
summarize their opinion in their
report to the AGM and for the
Annual Report.
Board of Directors
A2. Receive & discuss reports of IA. Monthly
A3. Receive & discuss reports of EA. Semi‐
Annual
A4. Prepare report to Board on Annual
Management
effectiveness of internal controls.

B.  Review internal  The IA will execute reviews based B1. Receive & discuss reports of IA Monthly
auditor’s reports on their annual plan (risk‐based) (same as A2).
approved by the board. Each
month, the board will receive
reports on new findings and a
status of the prior mitigating
actions.

25
At the end of the day, the Board should….
How do we define Corporate Governance?
 Question intelligently

 Debate constructively
Shareholders

 Challenge rigorously
Board of Directors

 Decide impartially
Management

Board Evaluations – Sample Criteria
Board Group Evaluations Individual Director Evaluations
How do we define Corporate Governance?
 Performance against set objectives  Preparation for board meetings
 Board’s contribution to strategic   Attendance at board meetings
development/oversight  Contribution at board meetings 
 Board’s contribution to promoting   Level of understanding of the company’s 
Shareholders
portfolio management, risk management  business
and control  Contribution to strategy, portfolio 
 Board has right mix of up to date  management, and risk management
knowledge and skills  Trusted and respected
Board of Directors
 Board’s response to any problems or   Keep their skills up to date
crises  Good interpersonal skills
 Relevance of board agendas  Open  and independently minded
 Board communication with management Management
 Adherence to duty of care and duty of 
 Contribution to General Assembly and  loyalty
annual report
 Effectiveness of the board’s committees

26
 Questions to Ask before the Board Meeting
 Does the agenda reflect the priorities, we need to address as a board? Are the most 
important, open questions first?

 Is the information provided by management precise, comprehensive, but condensed 
enough to understand the issue and the decision asked for?

 Do I have enough external information (independent from management) available for 
my judgement?

 What are the topics, where I can add special value, given my knowledge and 
experience?

 Where do I need to challenge management or the chairman, even to “stir the pot”?

53

Questions to Ask during and after the Board Meeting
 Do I really listen to the others?

 Are my contributions “on spot” (no more than 4 sentences) and grab the attention of the others?

 Do I really focus on what is important for the outcome and in line, where I am competent – or just 
where I have an opinion?

 Is the agenda (and time prioritization) followed? If not: for a compelling reason?

 Do I challenge others, especially management, in a professional way, respectful but tough on the 
issue, keeping the personal relationship?

 Is the work of the board committees sufficiently aligned with board priorities? Do I learn enough 
about their work and outcome?  Do I communicate enough about the committees, I serve on?

 Do I need to give feedback to the chairman or CEO regarding the flow of the session, their 
behaviour or the preparation?

27
 Example of a Board Meeting Agenda
Approve minutes of last meeting

Approve routine matters requiring limited discussion

Operating and financial performance against business plan

Executives’ reports – business unit performance

Board committee reports

Discuss and approve material transactions

55

Mini Case (Before): Prior Board Structure

ABC Board of Directors
• 5 Members, of which: 
• Chairman/CEO
• 1 shareholder nominees (includes the Chairman)
• 1 Executive (CFO)
• 2 Independent
*Many decisions made by Chairman and the SH Nominees

Chairman/
CEO

Internal 
Audit
Department 
Department 
Heads
Department 
Heads
Department 
Heads
Department 
Heads
Heads

28
 Mini Case (After): Revised Board Structure
ABC Board of Directors
• 7 Members, of which: 
• 3 shareholder nominees (includes the Chairman)
• 1 Executive (CFO – or CEO successor)
• 3 Independent  (SGX = half depending)
• Improved Hoteling, Human Capital/Org Dev, Int’l/Regional, 
Finance/Acctg Experience Corporate
• Meet at least monthly, as needed  Secretary

Recommendations made to the full Board for approval on various issues 
Board sub‐committee Board sub‐committee

Other Working Groups Governance & Organization 
Audit & Risk Committee (As needed) Committee
• 3 Non‐Exec Members, of which: • 3 Members, of which:
• 2 independent (including Chair)
• Ad Hoc groups created as  • At least 1 independent (must be majority 
• Financial & audit expertise needed for SGX)*
• Meet 6‐12/year, as needed • Focus on specific issues then  • Meet 4‐12/year, as needed
abolished
Key roles: Key roles
Oversight of Audit & risk, financials  Corporate Governance; HR & Org 
reporting, compliance, internal controls,  Development Oversight (incl IT); Succession 
conduct, E&S oversight planning; Director Remun/Nomination; 
Board Evaluation
*NB:  Given SGX requirements for the Nominations and Remuneration Committees to be 
a majority independent, this could be carved out as a separate committee prior to listing.

External  CEO
Audit
Management Steering Committee
Internal  (Management Level)
Audit Compliance 
Officer Serves as management role, but also reports on compliance 
to AC; Can be combined /w Corp Secretary

Thank You!

ifc.org/corporategovernance

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