UK Combined Code
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UK Combined Code in brief
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UK Combined code
Cadbury Greenbury Hampel
(1992) (1995) (1998)
Turnbull
Higgs
(1999)
(2003) COMBINED CODE
(latest edition:
2008)
Tyson Smith
(2003) (2003)
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Summary of Reports
Report Focus Outcome
Cadbury Board of directors, Separate Chairman’s and CEO’s
institutional investors, audit role, encourages dialogue and
and accountability good communication and
disclosure
Greenbury Directors’ remuneration Balance between salary and
performance
Hampel Dealt with criticisms of the Consolidated in a combined
previous report
Turnbull Directors’ role in reviewing Established frameworks for
internal control systems and internal control
reporting on them
Higgs Role of Non-Executive Guidelines on NEDs and their
Directors (NEDs) role in the board
Tyson Recruitment of NEDs As above
Smith Auditors and audit committee Role of audit committees
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Key provisions of UK combined code
The Board of Directors:
➢ Every listed company should be headed by an effective
board
➢ The board should meet regularly and the summary of its
operations to be included in the annual report
➢ The annual report should identify the chairman, CEO and
the senior independent directors, board committees and
their members
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Chairman and CEO
Separate roles and clear
division of responsibilities
for Chairman and CEO
No person should have
unfettered powers in the
organization
➢ Chairman should be
independent
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Chairman's role
Managing the board's business;
acting as its facilitator and
guide
Determining board composition
and organization
Clarifying board’s and
management’s responsibilities
Planning and managing board
and board committee meetings
Developing the effectiveness of
the board
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CEO’s role
Leading, guiding, directing, and
evaluating the work of other
executive leaders
Oversee the operation of an
organization in accordance with the
direction established in the strategic
plans
Recommending Board approvals for
various initiatives within the
company e.g. yearly budgets
Oversees design, marketing,
promotion, delivery and quality of
programs, products and services
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Board balance and independence
➢ To have a balance between
NEDS and Executive
directors: To avoid
dominance by one party
➢ NEDs should be independent
in character and judgement
➢ At least half of the board,
minus the Chairperson,
should be independent NEDs
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A non-executive director is a
member of a company's board
of directors who is not part of
the executive team
A non-executive director does
not engage in the day-to-day
management of the
organization,
NEDs are involved in policy
making and Strategic planning
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NEDs’ Roles
They provide objective
criticism to the running of
the company’s affairs
The facilitate strategic
decision making process of
a company
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An executive director is a
member of the board who
also has management
responsibilities
They have “executive
responsibilities” for running
the company’s business
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Appointments to the board
➢ To have a formal, rigorous and
transparent procedure for the
appointment of new directors to
the board
➢ There should be a nomination
committee in the board: majority
of its members should be NEDs
➢ To carry out annual evaluation of
skills, knowledge and expertise of
individual directors
➢ The chairperson to disclose their
other commitments before
appointment to the board
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Induction and professional development
➢ All directors should be inducted
into the company and the board
upon joining the board. They
should be introduced to the major
shareholders
➢ The board to ensure continuous
training and development of their
directors in order to update and
refresh their skills and knowledge
➢ All directors should have access to
the advice and services of the
company secretary
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Board’s annual performance evaluation
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Re-election of directors
All directors are to be elected
by shareholders at the 1st AGM
following their appointment
Retirement by rotation is a
process whereby at each
AGM,1/3 of the directors must
retire from their position and
seek re-election as directors
NEDs should be appointed for
specific term period of not
more than 3 years
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Directors’ remuneration
There should be a remuneration
committee to propose the
remuneration package for directors.
The committee should consist of
independent NEDs
Directors’ remuneration should be
sufficient to attract, retain and
motivate directors
Directors’ remuneration should be
linked to performance
**Share options cannot be
offered at a discount
NED’s remuneration should not include
share options and should reflect time
commitment and responsibilities
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Internal control
It is the role of the board to
maintain a sound system of
internal control in order to
safeguard shareholders’
investments and company’s assets
To have an annual review of the
effectiveness of the systems of
internal control which include
financial, operational and
compliance controls and risk
management systems
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Board committees
➢ The board should
form various
committees made
up of directors in
order to help the
board carry out its
duties effectively
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Audit committee
➢ There should be an audit
committee made of at least 3
NEDs and where one of them
should have recent and relevant
financial experience
➢ Where there is no audit
committee, the reasons for
failing to have one should be
disclosed in the annual report.
Such a company should have an
annual assessment of whether to
establish one
➢ External auditors should report to
audit committee
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