King III - Chapter 2: Boards and directors
Boards and directors, acting in the best interests of the company, form the focal point of corporate governance with responsibilities extending to shareholders and other stakeholders: “Companies should be headed by a board that should direct, govern and be in effective control of the company”.
The chapter discusses key governance responsibilities that directors are expected to consider, including:
Key provisions of the Report - click here
- The role and function of the board and its committees
- The composition and performance evaluation of the board and its committees
- The board appointment process
- Director development
- Remuneration of directors, senior executives, group boards and company secretaries
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The board and its committees must have clear terms of reference in place. These need to be reviewed annually to ensure that there are no gaps or overlaps.
The composition of the board and its committees will need to be reassessed to cover both financial and sustainability roles and responsibilities.
Performance evaluations of executive and nonexecutive directors are key, not only to assess efficiency and competence, but also to appraise reappointment and training needs.
A formal process for the appointment of directors must be in place and this should be disclosed in the integrated report.
Obtaining sufficiently skilled directors who are nonexecutive and independent as suggested by King III will require careful recruitment.
The role of the board as the focal point of governance is vital to the success of any organisation.
As a result, the board must have the appropriate balance of skills and experience within its ranks to fulfil its mandate. The composition and performance of the board and its committees are key factors that will determine the success of the organisation. In order to maximise the benefit that the company obtains from the board, regular performance evaluations need to be conducted and areas of improvement identified. This is essential not only to improve the efficiency and effectiveness of the board, but also to develop individual directors to enable them to better add value.
The principle that governance, strategy and sustainability are inseparable is one of the fundamental tenets of King III. The interplay between these elements and the manner in which the company incorporates them into its processes will be keenly watched.
- Do we have the right people in place to lead and manage all aspects of our business?
- Is the board sufficiently independent of management?
- Do we need to get external expert advice?
- Will we get greater value from board and committee evaluations if we employ an independent service provider?
- Are we comfortable that we have satisfied our overarching responsibilities adequately where we have delegated functions to subcommittees?
- Are we spending our time efficiently in meetings and dealing only with material issues?
- Is there a need to revise our board and committee charters?
- In which committee should we deal with sustainability issues?
- Are the current roles and structures of our subsidiary boards adding value?
- How do we incorporate strategy, risk, performance and sustainability into our decision making philosophy?
How we can help you The Sustainable Business Solutions group within PwC offers a range of integrated solutions to assist boards and directors to meet the demands and expectations of their stakeholders. Tailored and relevant to your needs, these embrace:
- Independent, comprehensive board and committee evaluations
- Thorough independent individual evaluations of office bearers including directors, CEOs, CFOs, chairmen and company secretaries
- Review and development of board and committee documentation
- Review and development of board and committee systems and processes
- Governance and director training.