Corporate Governance Value & Ethics

Unit-1
Corporate Governance:

Corporate governance is a broad term that has to do with the manner in which the rights
and responsibilities are shared among owners, managers and shareholders of a given
company. In essence, the exact structure of the corporate governance will determine what
rights, responsibilities, and privileges are extended to each of the corporate participants,
and to what degree each participant may enjoy those rights. Generally, the foundation for
any system of corporate governance will be determined by several factors, all of which
help to form the final form of governing the company.

Corporate governance is most often viewed as both the structure and the relationships
which determine corporate direction and performance. The board of directors is typically
central to corporate governance. Its relationship to the other primary participants,
typically shareholders and management, is critical. Additional participants include
employees, customers, suppliers, and creditors. The corporate governance framework
also depends on the legal, regulatory, institutional and ethical environment of the
community. Whereas the 20th century might be viewed as the age of management, the
early 21st century is predicted to be more focused on governance. Both terms address
control of corporations but governance has always required an examination of underlying
purpose and legitimacy. - - James McRitchie, 8/1999

Corporate governance is a field in economics that investigates how to secure/motivate

efficient management of corporations by the use of incentive mechanisms, such as
contracts, organizational designs and legislation. This is often limited to the question of
improving financial performance, for example, how the corporate owners can
secure/motivate that the corporate managers will deliver a competitive rate of return.
(Mathiesen, 2002)

Corporate governance is about how companies are directed and controlled. Good
governance is an essential ingredient in corporate success and sustainable economic
growth. Research in governance requires an interdisciplinary analysis, drawing above all
on economics and law, and a close understanding of modern business practice of the kind
which comes from detailed empirical studies in a range of national systems.
- Simon Deakin, Robert Monks Professor of Corporate Governance

"Corporate governance - the authority structure of a firm - lies at the heart of the most
important issues of society"… such as “who has claim to the cash flow of the firm, who
has a say in its strategy and its allocation of resources.” The corporate governance
framework shapes corporate efficiency, employment stability, retirement security, and the
endowments of orphanages, hospitals, and universities. “It creates the temptations for
cheating and the rewards for honesty, inside the firm and more generally in the body
politic.” It “influences social mobility, stability and fluidity… It is no wonder then, that
corporate governance provokes conflict. Anything so important will be fought over…
like other decisions about authority, corporate governance structures are fundamentally
the result of political decisions.”

"Shareholder value is partly about efficiency. But there are serious issues of distribution
at stake - job security, income inequality, social welfare. There may be many ways to
organize an efficient firm."

CORPORATE GOVERNANCE

Corporate governance is the responsibility of a firm's board of directors. While

management runs the company and oversees day-to-day operations, it is the board of
directors that "governs" the corporations by overseeing management and representing the
interests of the firm's shareholders.

By law, a corporation of any size must have a board of directors elected by its
shareholders. The directors have a fiduciary duty to the shareholders, who are the
corporation's owners, and directors as well as corporate officers can be held liable for
failing to meet their fiduciary duties to stockholders. A passive board can get into trouble
by relying on an influential CEO.

Investors and the public are particularly interested in the financial reports that publicly-
traded companies release, and boards of directors of these companies have a legal
obligation to ensure that these reports are fair and accurate. Recent business failures,
auditor malfeasance, and material deficiencies in financial disclosures, however, have
caused a serious erosion of public confidence in the financial reporting of these
companies.

Consequently, Congress enacted the Sarbanes-Oxley Act of 2002. Common law has
traditionally held that corporate directors have a primary fiduciary duty to the corporation
and a secondary duty the shareholders. Sarbanes-Oxley has essentially made directors
primarily responsible to the shareholders. The mandates of Sarbanes-Oxley are both
complex and extensive. Stated simply, however, they basically require that members of
corporate boards must avoid any financial, family, employee, or business relationships
with the companies on whose boards they serve.

Further, Sarbanes-Oxley limits the ability of employees of the independent auditing firm
from going to work for companies the auditor performs audit services for, and it requires
five-year rotation period for audit partners on a given company's assignments. In other
words, Sarbanes-Oxley clearly emphasizes independences and avoidance of conflict of
interest.

KEY GOVERNANCE ISSUES

Historically, corporate boards of directors have had a myriad of duties, most of them set
by common law and the corporation's own by-laws. These duties often include: hiring,
supervising, and sometimes firing the Chief Executive Officer; approving major strategic
decisions; meeting with shareholders; establishing executive compensation; making
decisions about mergers and acquisitions; assessing the viability of potential takeover
bids; taking action if the corporation fails; overseeing financial reporting and audits;
nominating board candidates; and refining board rules and policies.

One of the most difficult governance duties of the board of directors is the removal of the
firm's CEO. This can occur when the board, representing the interests of the shareholders,
disagrees with the strategic direction being pursued by the CEO, or if they merely want to
show they are "doing their duty" as board members. For example, when Carly Fiorino
was ousted as CEO of Hewlett-Packard (HP) in 2005, she was viewed by many to be
hard-driving and fearless. The HP board of directors, however, had grown increasingly
uncomfortable with her inability to deliver the profits that she promised she was going to
deliver. Her refusal to relinquish some operating control, or to make any changes that the
board requested, led to her downfall during a period of low profits and falling stock
prices.

One measure of good governance is whether the company has a CEO who can maximize
the company's performance. Whereas part of the governance function of the board of
directors is to select the firm's CEO, another is to endorse the CEO's strategy—if it is the
right one. For example, boards can support the CEO's strategic direction by endorsing
proposed acquisitions. It can push the CEO to accomplish even more by encouraging him
or her to think more broadly or by setting higher sales targets. The board can also support
the CEO's leadership by making sure that the CEO is able to put together a strong
management team to achieve those goals. In some cases the following CEO will be
recruited from the management team built by the present CEO.

Another difficult time for boards occurs when the firm is the target of a takeover attempt.
It is vitally important at such a time that the board have a clear sense of the value of the
firm and that it is enabled to fully evaluate takeover offers. During a takeover it is the
board's responsibility to accept or reject offers, and in so doing it must represent the
shareholders' interests when negotiating the sale of the firm.

GOVERNANCE COMMITTEES

Boards often administer their governance responsibilities by establishing committees to

oversee different areas of concern. Typical committees include audit, nominating, and
compensation committees. This is largely in line with U.S. regulatory guidance. On
August 16, 2002, the Securities and Exchange Commission (SEC) updated earlier
proposals related to corporate governance that would recommend, but not mandate, that
boards establish three oversight committees: a nominating committee, a compensation
committee, and an audit committee. The SEC recommended that these oversight
committees be composed entirely of independent directors.

Each committee oversees a specific area of corporate governance and reports to the full
board. The nominating committee's area of oversight consists of issues related to
management succession, including the CEO, and to the composition of the board of
directors. The compensation committee oversees compensation of the firm's CEO and its
officers, as well as director compensation. The audit committee is concerned with the
company's financial condition, internal accounting controls, and issues relating to the
firm's audit by an independent auditor.

Almost all publicly held corporate entities in the United States have an audit committee.
Since 1978, the New York Stock Exchange (NYSE) has required corporations to have
audit committees composed entirely of independent outside directors as a condition for
being listed. The audit committees of corporate boards of directors are generally expected
to serve as watchdogs for the investors and the creditors. Audit committees are expected
to protect the interests of both investors and creditors, as well steward corporate
accountability. Moreover, audit committees should make sure that management, the
internal auditors, and the external auditors understand that the committee will hold them
accountable for their actions (and in some cases, inaction).

The independent audit committee plays a key role in stewardship of the corporation it
serves. The audit committee should help ensure that the financial statements are fairly
stated, the internal controls are operating effectively, management risk is being reduced,
and new processes are minimizing risks. Moreover, the audit committee members should
be independent of management and maintain a close working relationship with the
independent auditors.

In an article in the Pennsylvania CPA Journal, author John M. Fleming sets forth the
primary responsibilities of the corporate audit committee: (1) Evaluating the processes in
place to assess company risks and the effectiveness of internal controls, and assisting
management in improving these processes where necessary; (2) monitoring the financial
reporting process both internally and externally; and (3) monitoring and evaluating the
performance of internal and external auditors.

A board will sometimes establish a fourth committee, the governance committee. The
governance committee is concerned with overseeing how the company is being run,
including evaluation of both management and the board of directors. In some cases the
nominating committee will evolve into, or function as, a governance committee.
ACTIVE GOVERNANCE

Historically, corporate boards have been described as either active or passive. Some
corporate CEOs relished having what they thought were "rubber stamp" boards of
directors who would approve virtually any actions they chose to pursue. Sarbanes-Oxley
has dramatically changed that dynamic. Corporate directors must now be much more
independent, and their legal liability to shareholders has increased significantly.

One example in which a traditionally "quiet" board stepped up and became more active
occurred with the Walt Disney Company. For years, Michael Eisner ruled the Disney
empire with an allegedly brutal iron fist. After Roy E. Disney, Walt Disney's nephew, led
a shareholder revolt of sorts and complained that investor votes were being ignored or
circumvented, the Walt Disney Company board of directors finally decided to step in. In
early 2004, the board took the chairmanship away from Eisner after more than 45 percent
of votes cast at company's annual meeting opposed his board re-election. It was a
resounding vote of no confidence. But the board then chose an Eisner ally, former U.S.
Senator George Mitchell, as chairman, over the objections of several larger shareholders.
Ironically, a year later, Eisner was easily re-elected to the board, with only 8.6 percent of
voters withholding their support for him.

Boards can take simpler steps to ensure they are not passive without voting out the CEO.
They can establish a non-executive chairman, a chairperson who is separate from the
CEO. The board can also staff all board committees with independent outside directors,
except the president and CEO.

THE ROLE OF INVESTOR ACTIVISM

Finding qualified people to serve on corporate boards of directors can be a challenging

task. Corporate board members are learning in the current legal environment that serving
on such board is can open them to a wide range of legal liability issues. The reforms of
Sarbanes-Oxley and the SEC all seem well-intended, but will they make a difference for
board members who get in over their heads or choose to look away?
Many critics argue that the proposed and enacted reforms do little to solve the real
problems that exist with corporate boards. For example, one issue that has been
repeatedly raised is the fact that corporate boards tend to only meet a couple of times a
year. Yet it is further argued that more frequent meetings do little to solve the major
problem, which is the fact that most corporate board members do not have enough access
to information to fulfill their duties of stewardship to the shareholders.

Another issue that has been raised after continuous corporate failures revolves around the
financial knowledge and competence of corporate board members. One proposed reform
to remedy this problem has been to offer more generous pay for corporate board
members, particularly those who serve on audit committees. The theory behind the
increased pay is that it would help attract more chief financial officers and former chief
executive officers from major accounting firms to serve on audit committees.

Proponents of such a move argue that former CFOs and CEOs are ideal audit committee
members. But, there remains a limited pool of these professionals available to serve on
audit committees. Furthermore, increased disclosure requirements are likely to raise
liability for individual audit committee members, thus having a negative impact on their
willingness to serve. Increased compensation may not persuade highly-qualified potential
committee members to accept the burdensome legal responsibility of vouching for a
multinational company's complex and intricate accounting system.

Finally, it is important to realize that having the best and most qualified corporate board
of directors is no guarantee that financial reporting or other problems will not occur.
Many of the corporate failures, large and small, that occur every year have arisen as a
result of inattention, reckless disregard, or malfeasance. While some of the new and
proposed regulations may address specific issues that have occurred in certain situations,
they will never fully compensate for flaws in human nature. Many corporate failures
would still have occurred under the new rules set by Congress and the SEC if board
members found ways to ignore or circumvent them. As long as human judgment and
discretion is permitted to operate within the corporate board function, there is room for
error and wrongdoing.

1 CORPORATE SOCIAL RESPONSIBILITY

Corporate Social Responsibility (CSR) is becoming an increasingly important activity to

businesses nationally and internationally. As globalization accelerates and large
corporations serve as global providers, these corporations have progressively recognized
the benefits of providing CSR programs in their various locations. CSR activities are now
being undertaken throughout the globe.

1.1 What is corporate social responsibility?

The term is often used interchangeably for other terms such as Corporate Citizenship and
is also linked to the concept of Triple Bottom Line Reporting (TBL), which is used as
framework for measuring an organization’s performance against economic, social and
Environmental parameters. The rationale for CSR has been articulated in a number of
ways. In essence it is about building sustainable businesses, which need healthy
economies, markets and communities.

The key drivers for CSR area:

� Enlightened self-interest - creating a synergy of ethics, a cohesive society and sustainable

global economy where markets, labour and communities are able to function well
together.

� Social investment - contributing to physical infrastructure and social capital is

increasingly seen as a necessary part of doing business.

� Transparency and trust - business has low ratings of trust in public perception.
There is increasing expectation that companies will be more open, more accountable and
be prepared to report publicly on their performance in social and environmental arenas

� Increased public expectations of business - globally companies are expected to do

more than merely provide jobs and contribute to the economy through taxes and
employment.”

1.2 Asia Pacific Perspective

Corporate social responsibility is represented by the contributions undertaken by

companies to society through its core business activities, its social investment and
philanthropy Programmers and its engagement in public policy. In recent years CSR has
become a fundamental business practice and has gained much attention from chief

executives, chairmen, boards of directors and executive engagement teams of larger

international companies. They understand that a strong CSR program is an essential
element in achieving good business practices and effective leadership. Companies have
determined
that their impact on the economic, social and environmental landscape directly affects
their relationships with stakeholders, in particular investors, employees, customers,
business partners, governments and communities.

The Asia Pacific context is distinct. On the one hand, there are long-standing traditions of
respect for family and social networks, and high value placed on relationships, social
stability and education. Diverse religions and cultures also bring distinct attitudes towards
community social behavior and engagement as well as support and philanthropic
contributions. Governments in the region also play distinct roles – often stronger in terms
of influence on economic and social priorities, yet not as advanced in terms of social
safety nets. This has resulted in the drivers for corporate citizenship being very different
from those in other regions. Many of the large corporations in Asia Pacific are private,
and many do not have the same public pressures on corporate behavior those public
companies in Europe and North America have for progress on corporate social
responsibility, although this is changing. Yet many often larger companies in Asia Pacific
have strong localized philanthropic programmers. Also, regional companies that are
engaged in supply chains of major global corporations, and local affiliates of global
corporations from Europe and America have significant pressures and strong business
case to develop corporate citizenship policies and practices within the region, not least on
the environment, human rights and labour standards.

Corporate Social Responsibility: Unlocking the value

According to the results of a global survey in 2002 by Ernst & Young, 94 per cent of
companies believe the development of a Corporate Social Responsibility (CSR) strategy
can deliver real business benefits, however only 11 per cent have made significant
progress in implementing the strategy in their organization. Senior executives from 147
companies in arrange of industry sectors across Europe, North America and Australasia
were interviewed for the survey. The survey concluded that CEOs are failing to recognize
the benefits of implementing Corporate Social Responsibility strategies, despite increased
pressure to include ethical, social and environmental issues into their decision-making
processes. Research found that company CSR programs influence 70 per cent of all
consumer purchasing decisions, with many investors and employees also being swayed in
their choice
of companies. "While companies recognize the value of an integrated CSR strategy, the
majority are failing to maximize the associated business opportunities," said Andrew
Grant, Ernst oung environment and Sustainability Services Principal. "Corporate Social
Responsibility is now determining factor in consumer and client choice which companies
cannot afford to ignore. Companies who fail to maximize their adoption of a CSR
strategy will be left behind."

Corporate Social Reporting:

Consequent to increasing globalizations, greater environmental and social awareness, and

more efficient communication, the concept of companies’ responsibilities beyond the
purely legal or profit-related has gained new impetus. In order to succeed, business now
has to be seen to be acting responsibly towards people, planet and profit (the so-called
‘3Ps’) sometimes also known as the triple-bottom line. The perspective taken is that for
an organization (or a community) to be sustainable (a long run perspective) it must be
financially secure (as evidenced through such measures as profitability); it must
minimizes (or ideally eliminate) its negative environmental impacts; and, it must act in
conformity with societal expectations. These three factors are obviously highly inter-
related. Many companies now report regularly on the subject producing Sustainability
and/or CSR (Corporate Social Responsibility) reports whose content is increasingly
scrutinized by investors and financial institutions.

Corporate Social Responsibility (CSR) has been defined by the European Commission
as the integration by companies of social and environmental concerns in their business
operations and in the interaction with their stakeholders on a voluntary basis. CSR is

CSR is to-day a strategically important and challenging development for European

business and policy makers taking root in a broad variety of industrial sectors.
Environment, safety and health at work are very much an integral part of the CSR
concept, companies recognize that they cannot be good externally, while having a poor
social performance internally.
CSR is an evolution in the approach towards sustainable development: while the 1992
Rio Earth Summit focused on environmental management, the 2002 World Summit on
Sustainable Development (WSSD) focused on a broader set of issues, including poverty
reduction and social development.

Since 2000 the CSR concept has pushed further and further up the corporate agenda as
business strives to act responsibly towards people, planet and profit (the so-called ‘3Ps’).
Some driving forces pushing CSR up the corporate agenda (including OSH) are:

• Informed investors recognise that the business risk (both internal and external) for
companies that successfully manage their social and environmental impact is
lower than the business average;
• Consumers prefer products that are produced in a socially responsible way
• Increased concern about the damage caused by economic activity to the
environment
• Transparency of business activities brought about by the media and modern
information and communication technologies
• Search for new forms of global governance
• Measurement of progress toward sustainable development:

Companies that already produce CSR reports have found that the process of developing a
sustainability report provides a warning of trouble spots and unanticipated opportunities
in supply chains, in communities, among regulators, and in reputation and brand
management. Reporting helps management evaluate potentially damaging developments
before they develop into unwelcome surprises.

Reporting and external communication is a significant part of CSR and one that is no
longer restricted to the largest multinationals. Recent statistics indicate that up to half of
the UK’s top 250 companies produce some sort of CSR report. The UN sponsored Global
Reporting Initiative (GRI) has developed a set of reporting guidelines for CSR reporting.
These Guidelines organize “sustainability reporting” in terms of economic,
environmental, and social performance (also known as the “triple bottom line”). This
structure has been chosen because it reflects what the most widely accepted approach to
defining sustainability is currently.

The Global Reporting Initiative (GRI) is a multi-stakeholder process and independent

institution whose mission is to develop and disseminate globally applicable Sustainability
Reporting Guidelines. These Guidelines are for voluntary use by organisations for
reporting on the economic, environmental, and social dimensions of their activities,
products, and services. The GRI incorporates the active participation of representatives
from business, accountancy, investment, environmental, human rights, research and
labour organisations from around the world. Started in 1997, GRI became independent in
2002, and is an official collaborating centre of the United Nations

Environment Programme (UNEP) and works in cooperation with UN Secretary-General

Kofi Annan’s Global Compact.

GRI is probably the most significant triple bottom line, multi-stakeholder, consensus-
based, public reporting guidelines or frameworks currently at the international level.
There are national-level initiatives being driven by governments, businesses and non-
governmental organisations alike, and many of them are aligning with GRI to allow ease
of use in the international arena. The Board of Directors – roles and responsibilities

The board of directors is appointed to act on behalf of the shareholders

to run the day to day affairs of the business.

The boards are directly accountable to the shareholders and each year the company will
hold an annual general meeting (AGM) at which the directors must provide a report to
shareholders on the performance of the company, what its future plans and strategies are
and also submit themselves for re-election to the board.

The objects of the company are defined in the Memorandum of Association and
regulations are laid out in the Articles of Association.
The board of directors' key purpose is to ensure the company's prosperity by collectively
directing the company's affairs, whilst meeting the appropriate interests of its
shareholders and stakeholders. In addition to business and financial issues, boards of
directors must deal with challenges and issues relating to corporate governance, corporate
social responsibility and corporate ethics.

It is important that board meetings are held periodically so that directors can discharge
their responsibility to control the company's overall situation, strategy and policy, and to
monitor the exercise of any delegated authority, and so that individual directors can
report on their particular areas of responsibility.

Every meeting must have a chair, whose duties are to ensure that the meeting is
conducted in such a way that the business for which it was convened is properly attended
to, and that all those entitled to may express their views and that the decisions taken by
the meeting adequately reflect the views of the meeting as a whole. The chair will also
very often decide upon the agenda and might sign off the minutes on his or her own
authority.

Individual directors have only those powers which have been given to them by the board.
Such authority need not be specific or in writing and may be inferred from past practice.
However, the board as a whole remains responsible for actions carried out by its authority
and it should therefore ensure that executive authority is only granted to appropriate
persons and that adequate reporting systems enable it to maintain overall control.

The chairman of the board is often seen as the spokesperson for the board and the
company.

Appointment of directors

The ultimate control as to the composition of the board of director’s rests with the
shareholders, who can always appoint, and – more importantly, sometimes – dismiss a
director. The shareholders can also fix the minimum and maximum number of directors.
However, the board can usually appoint (but not dismiss) a director to his office as well.
A director may be dismissed from office by a majority vote of the shareholders, provided
that a special procedure is followed. The procedure is complex, and legal advice will
always be required.

Roles of the board of directors

The roles of the board of directors include:-

Establish vision, mission and values

• Determine the company's vision and mission to guide and set the pace for its

Current operations and future development.

• Determine the values to be promoted throughout the company.

• Determine and review company goals.
• Determine company policies

Set strategy and structure

• Review and evaluate present and future opportunities, threats and risks in the
external environment and current and future strengths, weaknesses and risks relating
to the company.
• Determine strategic options, select those to be pursued, and decide the means to
implement and support them.
• Determine the business strategies and plans that underpin the corporate strategy.
• Ensure that the company's organizational structure and capability are appropriate
for implementing the chosen strategies.

Delegate to management

• Delegate authority to management, and monitor and evaluate the implementation

of policies, strategies and business plans.
• Determine monitoring criteria to be used by the board.
• Ensure that internal controls are effective.
• Communicate with senior management.

Exercise accountability to shareholders and be responsible to relevant

stakeholders

• Ensure that communications both to and from shareholders and relevant

stakeholders are effective.
• Understand and take into account the interests of shareholders and relevant
stakeholders.
• Monitor relations with shareholders and relevant stakeholders by gathering and
evaluation of appropriate information.
• Promote the goodwill and support of shareholders and relevant stakeholders.
•
 Responsibilities of directors

Directors look after the affairs of the company, and are in a position of trust. They might
abuse their position in order to profit at the expense of their company, and, therefore, at
the expense of the shareholders of the company.

Consequently, the law imposes a number of duties, burdens and responsibilities upon
directors, to prevent abuse. Much of company law can be seen as a balance between
allowing directors to manage the company's business so as to make a profit, and
preventing them from abusing this freedom.

Directors are responsible for ensuring that proper books of account are kept.

In some circumstances, a director can be required to help pay the debts of his company,
even though it is a separate legal person. For example, directors of a company who try to
'trade out of difficulty' and fail may be found guilty of 'wrongful trading' and can be made
personally liable. Directors are particularly vulnerable if they have acted in a way which
benefits them.

• The directors must always exercise their powers for a 'proper purpose' – that is, in
furtherance of the reason for which they were given those powers by the shareholders.
• Directors must act in good faith in what they honestly believe to be the best
interests of the company, and not for any collateral purpose. This means that,
particularly in the event of a conflict of interest between the company's interests and
their own, the directors must always favors the company.
• Directors must act with due skill and care.
• Directors must consider the interests of employees of the company.

Calling a directors' meeting

A director, or the secretary at the request of a director, may call a directors' meeting. A
secretary may not call a meeting unless requested to do so by a director or the erectors.
Each director must be given reasonable notice of the meeting, stating its date, time and
place. Commonly, seven days is given but what is 'reasonable' depends in the last resort
on the circumstances

Non-executive directors

Legally speaking, there is no distinction between an executive and non-executive

director. Yet there is inescapably a sense that the non-executive's role can be seen as
balancing that of the executive director, so as to ensure the board as a whole functions
effectively. Where the executive director has an intimate knowledge of the company, the
non-executive director may be expected to have a wider perspective of the world at large.

The chairman of the board

The articles usually provide for the election of a chairman of the board. They empower
the directors to appoint one of their own number as chairman and to determine the period
for which he is to hold office. If no chairman is elected, or the elected chairman is not
present within five minutes of the time fixed for the meeting or is unwilling to preside,
those directors in attendance may usually elect one of their number as chairman of the
meeting.

The chairman will usually have a second or casting vote in the case of equality of votes.
Unless the articles confer such a vote upon him, however, a chairman has no casting vote
merely by virtue of his office.

Since the chairman's position is of great importance, it is vital that his election is clearly
in accordance with any special procedure laid down by the articles and that it is
unambiguously minted; this is especially important to avoid disputes as to his period in
office. Usually there is no special procedure for resignation. As for removal, articles
usually empower the board to remove the chairman from office at any time. Proper and
clear minutes are important in order to avoid disputes.

Role of the chairman

The chairman's role includes managing the board's business and acting as its facilitator
and guide. This can include:

• Determining board composition and organization;

• Clarifying board and management responsibilities;
• Planning and managing board and board committee meetings;
• Developing the effectiveness of the board.
• Shadow directors

In many circumstances, the law applies not only to a director, but to a 'shadow director'.
A shadow director is a person in accordance with whose directions or instructions the
directors of a company are accustomed to act. Under this definition, it is possible that a
Director, or the whole board, of a holding company, and the holding company itself,
could be treated as a shadow director of a subsidiary.

Professional advisers giving advice in their professional capacity are specifically

excluded from the definition of a shadow director in the companies’ legislation.