Managing the Board of DirectorsMANAGING THE BOARD

Mr. Olakunle Olusanya

Company Secretary & Legal Director

Fan Milk Plc ( A Danone Company)

Outline

• Board Structure & Composition

• Managing Boardroom Dynamics

• Conflict of Interest & Ethical Culture

• Achieving Effectiveness

The Board of Directors

“A successful Company is headed by an effective Boardwhich is responsible for providing entrepreneurial andstrategic leadership as well as promoting ethical cultureand responsible citizenship. As a link betweenstakeholders and the Company, the Board is to exerciseoversight and control to ensure that Management acts inthe best interest of the Shareholders and otherstakeholders while sustaining the prosperity of theCompany”.

- Principle 1, NCCG 2018

Definition and Types ofDirectors

• Persons duly appointed by the Company todirect and manage the business of the Company.

• In law there is no real distinction betweendifferent categories of Directors. It is howeveran established practice to classify Directorsaccording to their different roles on the Board.

• “It may be “unhelpful and even misleading toclassify company directors as “executive” and“non-executive” for purposes of ascertainingtheir duties to the company or when any specificor affirmative action is required of them” – ReElgindata Ltd

Principle 3 - The Chairman

“The Chairman is responsible for providing overall

leadership to the Company and the Board, and

eliciting the constructive participation of all

Directors’ to facilitate the effective direction of

the Board”

The Chairman’s Role

• Ensure the effective operations of the Board such that the Board works as a grouptowards achieving the strategic intent/objectives.

• Provide guidance to the MD and be available to him for regular communication.

• The MD/CEO/ED should not go on to become Chairman – in exceptional circumstancesto adopt a cool off period of 3 years

• Ensure that Management provides the Directors with accurate timely and adequateinformation

• Periodically interact with NEDs

The Managing Director/CEO“The Managing Director is the head of Management delegated bythe Board to run the affairs of the Company to achieve itsstrategic objectives for sustainable corporate performance” -Principle 4, NCCG 2018

• Head of the management team and answerable to the Board

• Should be very knowledgeable about the Company’s activities

• Must demonstrate industry credibility and integrity and enjoythe confidence of the Board and management.

• Has key responsibility for the day-to-day running of theCompany

• Acts as the Company’s leading representative in its dealingswith stakeholders

• The authority of the CEO/MD and the relationship betweenthe office and the Board should be clearly defined in his letterof appointment or in a Delegation of Authority Document

Executive Directors“Executive Directors support the Managing Director in theoperations and management of the Company” – Principle 5,NCCG• Officers holding service contracts and appointed to the Board.

• Responsible for the day-to-day running of the Company

• Employees of the Company expected to devote their whole timeand attention to the work of the Company

• Have an intimate knowledge of the operations of the company –creates an imbalance in the amount and quality of informationpossessed by Executive and Non-Executive Directors

• Entrusted with ensuring that the information laid before the Boardby Management is an accurate reflection of the affairs of theCompany

• Executive Directors need to strike a balance between theirmanagement of the company, their fiduciary duties and theindependent state of mind required - “is this right for thecompany?” and not “is this right for the Management of thecompany?”.

Principle 6 – Non-Executive Directors

“Non-Executive Directors bring to bear their knowledge, expertise andindependent judgment on issues of strategy and performance on the Board”

• Should have unfettered access to Executive Directors, Company Secretary

and the Internal Auditor, while access to other senior management should be

through the MD.

• Should be provided, in a timely manner, with reasonable support as well asquality and comprehensive information relating to the management of theCompany.

Independent Directors

“Independent Non-Executive Directors bring a high degree of objectivity tothe Board for sustaining stakeholder trust and confidence” - Principle 7 –NCCG, 2018:

Defined as an individual who;

• Is not a significant shareholder of the Company (>0.01%);

• Is not a representative of a shareholder who has the ability to control Management;

• Had not previously been employed by the Company/Group in the last 5 years,

• Is not a close family member of an adviser, Director, senior employee, consultant, auditor, creditor,supplier, customer or substantial shareholder

• Has had no contractual/business relationship with the Company in the last 5 years.

• Has not been a regulator in the last 3 years

• Does not render professional, consultancy or other advisory service

• Receives no additional remuneration other than Directors fees and allowances an

• Has not served on the board for longer than 9 years

NCCG Principle 8 – The Company Secretary

“The Company Secretary plays an important role in supporting the effectiveness of theBoard by assisting the Board and management to develop good corporate governancepractices and culture within the Company”

• Has the gravitas and objectivity to provide independent guidance and support at the highest

level of decision making

• Should be a member of senior management and should be appointed through a rigorous

selection process similar to that of new Directors

• Should be empowered by the Board to effectively discharge his/her duties

• Reports functionally to the Board and administratively to the MD

• The Board should approve the performance evaluation of the CS

• Board Meetings• The Board is required to meet at least once every quarter.• Every director is entitled to receive notice of a Board meeting

at least 14 days before the meeting.• Failure to give adequate notice to all Directors entitled to

receive the notice shall invalidate the meeting.• Every Director should endeavor to attend all Board meetings.

The attendance record of Directors should be among thecriteria for the re-election of Directors.

Proceedings ofDirectors

• Resolutions of Directors• Directors reach their decisions by resolutions and by a

majority of votes.• Each director shall be entitled to one vote.• The Chairman shall have a second or casting vote in the case

of an equality of votes.• Where it is not possible to have physical meetings with all

the directors present, resolutions can be passed by writtenresolutions signed by all the directors.

Board Structure & Composition

“The effective discharge of the responsibilities of theBoard and its committees is assured by an appropriatebalance of skills and diversity (including experience andgender) without compromising competence,independence and integrity”

- Principle 2, NCCG, 2018

Board Structure and Composition

An appropriateThe Board should have an

effective Committeebalance between the3 types of Directors –

the company

Availability for Boardresponsibilities – The

Board should givecareful consideration

to “multiple

The Board shouldhave appropriate

diversity –experience, gender,

ethnicity, age

Clear separation ofpowers, roles and

responsibilitiesbetween the Boardand Management.

The positions of theChairman and MD

should be separate.

system – Audit;Governance/Remuneration

and Risk ManagementCommittees – with Chartersdefining terms of reference,

composition, tenure, etc.

requires a uniquecombination of skills

to meet differentchallenges.

directorships”.

Board Size

• Bigger not necessarily Better

• Too small could be unhealthy – no critical mass

to sustain healthy debate – dominant CEO

• It need not be an odd number Board

• Affordability – Directors don’t come cheap

The Role of the Board of Directors

• Accountability

• Leadership

• Strategy & Direction

• Define Corporate Ethical Culture - Tone at the Top

• Measure & Monitor Performance

• Risk Management

• Ensure True & Fair View of Financial Statements

• Succession Planning & Business Continuity

Managing Boardroom Affairs

• To effectively manage the Board, the CompanySecretary should:

✓ Be knowledgeable on and be abreast of all laws andregulations applicable to the sector in which thebusiness operates.

✓ Have a good knowledge of the company’s business,the Articles of Association, Board & CommitteeCharters, Policies, etc

✓ Have necessary soft skills -good communication skillsand emotional intelligence

✓ Be professional, efficient and always prepared

✓ Be Confident

✓ Be able to engage Directors individually andcollectively

✓ Have excellent record keeping capabilities

✓ Have Gravitas!

BoardAccountability• Owners

Foresight• Develop Purpose

• Regulators • Vision & Values

• Stakeholders • Developing Corporate Culture

• Monitoring the External Environment

Supervision• Overseeing Management Performance

Strategy• Define the Central Idea

• Ensure Controls are in place • Setting the Direction

• Reviewing Key Business Results

• Assessing Organizational Capability

• Reviewing & Deciding Key Resources

• Designing the Implementation Process

• Determining Risk Appetite

Agenda –The Roleof the CS

Directors As Fiduciaries

“Fiduciary”- serving the interest of others rather thanpersonal interests.

• Directors are fiduciaries and as such they are expected to :

• Act in good faith at all times – A duty primarily owed toall stakeholders.

• Exercise power only for proper purpose - if not, theymay be liable for losses incurred.

• Exercise care and skill – what a prudent Director woulddo in comparable circumstances.

• Protect corporate property, opportunity or information,a duty of confidentiality

• Not to fetter their discretion – how realistic?

• Not to allow personal interests to conflict with theirduties and responsibilities as Directors.

Companies and Allied Maters Act (CAMA)

“A director shall act at all times in what he believes tobe in the best interest of the company as a whole so asto preserve its assets, further its business, and promotethe purposes for which it was formed, and in suchmanner as a faithful, diligent, careful and ordinarilyskillful director would act in the circumstance” CAMA

Conflict of Interest

• A conflict of interest occurs when an individual’s privateinterest interferes in any way or appears to interfere withthe interest of an entity to which he owes a duty.

• It is inevitable that Directors will occasionally facesituations of potential conflict of interest whether directlyor indirectly.

• Directors should promptly disclose any real or potentialconflict of interest that they may have regarding anymatters that may come before the Board or itsCommittees (disclosures should recorded in minutes ofBoard or Committee meetings).

• A Director should abstain from discussions and voting onany matter in which he has or may have a conflict ofinterest.

•A Director should not be present during the time any

matter on which he has an interest is being decided –

NCCG, 2018.

"Corporate officers and directors are notpermitted to use their position of trust andconfidence to further their private interests.While technically not trustees, they stand in afiduciary relation to the corporation and itsstockholders…..and, by embracing theopportunity, the self-interest of the officer ordirector will be brought into conflict with that ofhis corporation, the law will not permit him toseize the opportunity for himself."

TheJudgment

Conflict Of Interest Policy

Developing a Corporate Ethical Culture

Three main pillars in developing and sustaining acorporate ethical culture:

• A set of core ethical values infused throughoutthe organization in its polices, processes andpractices

• A formal Ethics program, including a Code ofConduct & Ethics, Ethics training, a WhistleBlowing Policy and an Ethics Officer

• The continuous presence of ethical leadership -the tone at the top

• A Code of Ethics is a formalstatement of an organization’sideas and values.

• A written set of guidelines issued bythe organization to its staff andmanagement to help them conducttheir actions in accordance with itsprimary values and ethicalstandards.

• A code of ethics document mayoutline the mission and values ofthe business or organization , theethical principles based on theorganization’s core values and thestandards to which employees areheld.

Code of Ethics - Definitions

Mission , Vision,values and guiding

principles

Compliance withConflicts of Interest

Acceptance of Gifts

Use of IT

Laws & Regulations

Key Bribes & FacilitationPayment

Confidentiality

Elements ofthe Code ofEthics

Use of the Bureau'sassets

Political Affiliations

Generic examplesof what constitutes

unacceptable

Enforcement andImplementation

mechanism.

Dealing with CodeViolation

behavior

Personal Attributes of an Effective Company Secretary

• Strong Interpersonal and communication skills

• Energy and Enthusiasm

• Courage & Confidence

• Integrity

• Independent Thinking

• Open Minded

• Accountable and Responsible