Board Charter

BOARD CHARTER

A board charter is a policy document that clearly defines the respective roles, responsibilities and authorities of the board of directors (both individually and collectively) and management in setting the direction, the management and the control of the organisation.

BENEFITS OF BOARD CHARTERS

1. Assists the corporation’s leadership in delivering good governance;
2. Documents the policies that the board has decided upon to meet its legal and other responsibilities;
3. Serves as a reminder for the board of the legal framework within which it operates;
4. Is a point of reference for disputes;
5. Serves as an induction tool for new directors and senior managers;
6. Greatly assists in establishing effective operating procedures for a board;
7. Develops of a shared understanding of the board’s role throughout the organisation.

The stages of developing a Board Charter:

1. Meetings with key governance personnel, e.g. the chair, CEO and company secretary, to plan the project;

2. Document existing board policies and practices, and analyse the documentation collected;

3. Prepare materials for discussion;

4. Facilitate a workshop with the board to discuss the draft charter

5. Document the board’s decisions in the board charter for final approval;

6. The board or a committee of the board to review the charter annually.

MATTERS TO BE INCLUDED IN A BOARD CHARTER

THE BOARD STRUCTURE

1. Composition Of The Board- its size, number of independent directors.
2. Criteria and procedure of selecting New Directors
3. Resignation or Removal of a Director
4. Directors Change of Status
5. Limits on Outside Board Memberships, directors’ terms of service and age
6. Roles of the Directors of the board
7. Role of the Chairperson, the Company Secretary and the Managing Director
8. Roles of any other executives

FUNCTIONS OF THE BOARD OF DIRECTORS

Board Committees may be formed to carry out certain functions such as audit, human resource, governance, executive, credit risk, risk management and compliance.

The board functions mainly include:

a) Financial Matters– such as approval of the strategy, business plans and annual budgets, dividend payments, financial statements, material changes or deviations in plans and projections and investments and other changes to share capital.

b) Statutory and Administrative functions– such as amendments to the Memorandum or Articles of Association of the Bank, appointment, removal or replacement of the external auditor of the Company, convening general meetings of shareholders, granting of general signing authorities pursuant to the Articles of the Bank, appointment, removal or replacement of the Company Secretary and formulation and amendment of the Bank’s Code of Ethics and Conduct.

c) Regulatory functions– such as approval of terms and conditions of capital raising and debt issues, circulars to shareholders, major investments and recommendations to shareholders for approval of ordinary or special resolutions among other matters as prescribed in law and under the Articles of Association.

d) Human Resources – such as appointments to and removals from the Board, committee terms of reference definition and changes, Directors’ fees and allowances as recommended by Governance and Nominations Committee and approval of any employee incentive schemes and related matters.

BOARD MEETINGS

The work plan of the board will involve certain things regarding the meetings such as:

• Timelines and schedules of meetings
• The agenda for committee meetings
• Place or venue
• Notice and circulation
• Duty to attend and quorum of meetings
• The conduct of meetings
• Voting and majority action
• Minutes of meetings

BOARD EFFECTIVENESS

Board Remuneration

Executive Director Succession Planning

Board Evaluation

Director Development- training and continuing education of directors

CONTENTS OF A GOOD BOARD CHARTER

1. Statement on good governance
2. Objectives of the charter
3. Definitions
4. Incorporation of the company- purpose of the company, values, vision, goals
5. The board structure
6. Composition
7. Size
8. Appointment of directors
9. Term limits
10. Removal and resignation
11. Powers of the board
12. Induction and orientation of board members
13. Training and continuous skills development
14. Remuneration
15. Succession planning
16. Matters reserved for the board
17. Liability of the members
18. role and functions of the board- responsibilities of the board, chair person, chief executive officer, corporation secretary
19. The board practice- board workplan, board papers and board meetings
20. Committees and committee meetings- audit and risk committee, human resource committee and corporate governance committee.
21. Code of conduct for board members
22. Governance audit
23. Transparency and disclosure
24. Accountability, risk management and internal controls
25. Conflict of interest
26. Stakeholder relationships and corporate citizenship
27. Common seal of the board
28. Dispute resolution and compliance with laws and regulations
29. Review of the charter

CHARACTERISTICS OF GOOD BOARD GOVERNANCE

The Central Bank of Kenya and the Capital Markets Authority have outlined several characteristics of good corporate governance, key among which are:

1. Discipline: the commitment by a company’s Senior Management and Board Directors to adhere to behaviour that is universally recognised and accepted to be correct and proper;

2. Transparency: the ease with which an outsider is able to make meaningful analysis of a company’s actions, its economic fundamentals and the non-financial aspects pertinent to the business;

3. Independence: the extent to which mechanisms have been put in place to minimise or avoid potential conflicts of interest that may exist, such as dominance by a strong chief executive or large shareowner;

4. Accountability: individuals or groups in a company, who make decisions and take actions on specific issues, need to be accountable for their decisions and actions;

5. Responsibility: with regard to management behaviour that allows for corrective action and for penalising mismanagement. Responsible management would, when necessary, put in place what it would take to set the company on the right path. While the Board is accountable to the company, it must act responsively to and with responsibility towards all stakeholders of the company;

6. Fairness: the systems that exist within the company must be balanced in taking into account all those that have an interest in the company and its future. The rights of various groups have to be acknowledged and respected;

7. Social responsibility: a well-managed company will be aware of, and respond to, social issues, placing a high priority on ethical standards

If you would like to draft a board charter for your organization, please contact us on swanjiru@capitaregistrars.co.ke or by phone +254726328555.