Board of Directors & corporate governance

April 16, 2024
Board of Directors & corporate governance

Majed Garoub

A basic principle of corporate governance (CG) relates to the Board of Directors of the company, wherein the company shall be headed by an effective, collegial, and informative Board of Directors. You, as an executive or board member, need to ask yourself, where do we (as a company) stand in this?

To achieve the ultimate goal and rationale of corporate governance, all members of the Board of Directors should understand the exact role and responsibilities of the Board as stipulated, inter alia, in the Company Law, the Articles & Memorandum of Association of the company, the corporate culture, and the corporate governance code.

The outcome of this, in particular, highlights that the role of the Board is different from the role of the shareholders of the company (whose interests the Board serves) and also the role of the officers at the different levels working in the company.

All members of the Board of Directors in each company are responsible both individually and collectively for performing these responsibilities, which cannot be transferred nor delegated to other persons or to other bodies of the company.

When a new Board director is appointed, the chairman of the Board, assisted by the legal advisor of the company, should review the Board's role and duties with all members of the Board of Directors, particularly covering the legal and regulatory requirements and the particulars stipulated in the Code of Corporate Governance.

The Board of Directors should consider adopting a formal “Board Charter” or other statement in a legal document specifying matters which are reserved to the Board, which should include but need not be limited to the specific items stated in the Company Law. An alternative is a formal statement or by-law stating the functions and authority delegated to the officers as mentioned in the Company Law.

The Board of Directors should be collegial and deliberative, to gain the benefit of each member of the Board of Directors' judgment and experience. The chairman should take an active lead in promoting mutual trust, open discussion, constructive dissent, and support for decisions after they have been made.

To achieve such goals, the Board of Directors should meet frequently. Regarding attendance, more control measures are required, and continuous absence could lead to termination of membership. In this, we believe that perseverance and loyalty are necessary elements for consideration at the time of appointing each member on the Board of Directors.

Commitment and accountability reflect the effectiveness of the Board and are essentially required and should be observed by members of the Board of Directors, taking into account that they are supposed to excel and set a good example for all related parties in the company, the shareholders, and community stakeholders.

If you are a Board member, you need to ask yourself where do you stand in this and are you effective enough to make your Board of Directors more effective, as required for corporate governance purposes.

April 16, 2024
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