Practice Guidance 1: Board Roles and Director Duties
The Board's role is to:
Scope of Director Duties
Directors should be aware of their duties at law, which includes acting in good faith and the best interests of the company; exercising due care, skills and diligence; and avoiding conflicts of interest. Directors should also put in place policies, structures and mechanisms to ensure compliance with legislative and regulatory requirements, establish appropriate tone-at-the-top, desired organisational culture and standards of ethical behaviour.
While the duties imposed by law are the same for all directors, a listed Board will generally have different classes of directors (executive, non-executive and independent directors) with different roles:
Conflicts of Interest
The Board should have clear policies and procedures for dealing with conflicts of interest. Where the director faces a conflict of interest, he or she should disclose this and recuse himself or herself from meetings and decisions involving the issue. For instance, if the Chairman of the Board (Chairman) is a member of the Nominating Committee (NC), he or she may face a conflict of interest on discussions relating to the succession of the Chairman and should thus recuse himself or herself from such discussions after providing his or her input to the NC on other matters.
There should be formal communication from the company to each of the directors on their appointment and their roles, duties, obligations and responsibilities, and the expectations of the company. This includes each director developing his or her competencies to effectively discharge his or her duties.
To ensure that directors have the opportunities to develop their skills and knowledge, the Board should develop a policy and criteria for directors' development. The Chairman and the NC Chairman should jointly and regularly review and agree with each director his or her training and professional development needs.
Board Organisation and Support
The Board may form board committees, and decide the scope and the matters delegated to the board committees. Generally, all important decisions should be made at the Board level.
If the Board chooses to form an executive committee (EXCO) and delegate certain matters for the EXCO to decide, it is responsible for understanding the EXCO's discussions and endorsing the EXCO's decisions.
Management provides the Board with information for its meetings and decision making, including board papers and supporting information. In respect of budgets, any material variance between the projections and actual results should also be disclosed and explained.
Relying purely on what is volunteered by Management is unlikely to be enough in all circumstances and further enquiries may be required if the director is to fulfil his or her duties properly. Directors are entitled to request from Management and should be provided with such additional information as needed to make informed decisions. Management should provide the information in a timely manner.
The Board should be supported by the company secretary, whole role should be clearly defined. The company secretary's responsibilities include advising the Board on corporate and administrative matters, as well as facilitating orientation and assisting with professional development as required. The company secretary should attend all board meetings.