INSTITUTE OF CORPORATE GOVERNANCE OF UGANDA

1. INSTITUTE OF CORPORATE GOVERNANCE OF UGANDA THE BOARD, BOARD COMMITTEES AND HUMAN RESOURCE MANAGEMENT PRESENTED TO INSURANCE REGULATORS AND SUPERVISORS BY SAM F. OWORI CEO, ICGU MUNYONYO COMMONWEALTH RESORT Wednesday 9th , March, 2011

2. SESSION OBJECTIVES • Discuss Board’s Responsibility, Authority and Conduct • Board Committees. • The Board and HR Management. • Responsibilities, Relationships and soft/people skills. • Recommendations for Effective Board.

3. FIRST THINGS FIRSTWHAT IS A BOARD OF DIRECTORS Definition 1: It is a small group of people elected by shareholders to represent the latter’s interest through: • Strategic direction • Oversight governance • Fiduciary responsibility.

4. Definition 2: A Body that is ultimately accountable and responsible for the Performance and Conformance of an enterprise. - 1994 King’s Committee Report, Revised 2002.

5. WHO IS A DIRECTOR? Any person occupying the position of a director By whatever name designated including any person in accordance with whose directions or instructions the Directors of a corporation are accustomed to act.

6. …Cont’d Mozley & Whiteley’s Law Dictionary states: A director is “ A person who conducts the affairs of a Company.” The American Heritage Dictionary states: “ A member of a Board of persons who control or govern the affairs of an institution or corporation.”

7. TEST OF A DIRECTOR • The test of a director is one of substance and function other than form. • Directors include executive, non-executive, alternate, shadow, independent. • Directors need not be natural persons, but are represented by natural persons.

8. BOARD WORKS WITH • Shareholders • Board and Management Committees • CEO, Board Secretary and Employees • Stakeholders • Internal and External Auditors

9. BOARD RESPONSIBILITY Directors are responsible to shareholders by: • Protecting shareholder’s investment • Providing competitive long term returns • Implementing internationally accepted Corporate Governance principles • Timely regular and relevant financial reporting • Accountability to shareholders at AGM.

10. POWERS OF THE BOARD • Powers are vested in the whole Board. • Board forms Committees with/ without powers. • Board delegates most decisions to management. • Management runs the Company, day-today. • Board and management relationship is critical.

11. FUNCTIONS OF THE BOARD • Oversight over management. • Making major policy and strategy decisions • Monitoring deployment and utilization of assets • Establishing terms for hiring, evaluating, firing employees. • Preparation and submission of reports to Regulators and stakeholders. • Approval of budget, plans and accounts.

12. DUTIES OF DIRECTORS • Duties are owed by each Director individually. • Fiduciary duty of loyalty and good faith • Duty of care and skill • Duty to supervise • Duty not to entrench • Duty to avoid conflict of interest

13. DIRECTORS’ FIDUCIARY DUTIES • Directors must be honest. • No personal advantage from position as Director. • To act in good faith [bona fide] in the best interest of the Organization. • Proper use of their powers. • Retain freedom of action/unfettered discretion • Not to accept benefits from third parties

14. DIRECTORS’ DUTY OF CARE, SKILL, AND DILIGENCE • To exercise care, skill and diligence. • Duty to attend board meetings. • To promote success of the company • Duty to Govern, not to manage • Duty to provide work • Duty to Monitor management, Controls, decisions.

15. BOARD COLLECTIVE EFFECTIVENESS CRITERIA • Policy Formulation and Foresight. • Strategic Leadership/Strategic thinking. • Supervising Management/Managing operating Environment. • Monitoring, Review and Risk Management. • Budget approval and Performance • Corporate communication and Accountability to Stakeholders.

16. ANNUAL RIGOROUS EVALUATION FOR EFFECTIVENESS • Self evaluation by each director • Peer Evaluation of individual director’s performance. • Evaluation of the Board as a whole • Evaluation of the Chairperson • Evaluation of the CEO/MD/Secretary • Evaluation for training needs and up skilling.

17. TIME WASTERS • Confirmation/Approving minutes of previous meetings. • Matters arising. • Late delivery of Board Papers. • Non-reading of documents. • Quality of Board documents, i.e. Content and Decision required.

18. SUCCESSION POLICY • No success without succession. • Determine term limits to allow overlap • Circulate expiry dates to all directors • Renewal is opportunity for skills improvement • Determine available vs. required competencies • Include key stakeholders for public accountability

19. HRM refers to activities undertaken to attract, develop, and maintain an effective workforce within an organization.

20. HR PRINCIPLE • Primary asset: Employees, over Board and Shareholders. • Success depends on effective deployment, development & management of HR • Strategic and coherent HR management is critical. • Vision, Mission, Culture, Structure influence HRM

21. HUMAN RESOURCE MANAGEMENT MODEL Organization Strategy & structure HR Planning Selection Identifying and Performance Appraisal solving HR problems Training Desired Results. The right number of appropriately skilled people in the right jobs at the right time.

22. WHO IS AN EMPLOYEE? “ An employee is a person who has entered into or works under(or where the employment has ceased, worked under) a contract of employment.” Rather than: “ A person who is employed on a contract for services.”

23. GOALS OF HR MANAGEMENT Attract an Effective workforce - HRM Planning - Job Analysis - Forecasting - Recruiting - Selection Maintain an Effective Workforce Develop an Effective Workforce -Wage and Salary - Training - Benefits - Development - Labour relations - Appraisal - Termination

24. MAINTAINING AN EFFECTIVE WORKFORCE: • Intrinsic rewards: Satisfaction, Esteem, Pride, Growth. • Healthy relationships across the organisation. • Extrinsic rewards: Financial, Non-financial, Performance related. • Competitive wage and salary structure • Retirement benefits: Pensions, Employee future confidence. • Exit interviews: Make departing employees ambassadors.

25. MAINTAINING AN EFFECTIVE WORKFORCE :REWARD AND RECOGNITION • Develop reward and recognition policy • Balance equity & worth (allocation to projects vs staff ) • Good remunerations attract, motivate and minimize turn-over • Implement, transparency in reward and recognition.

26. BOARD COMMITTEES What are they? A group of people officially delegated to perform a function such as investigating, considering, reporting or acting on a matter. American Heritage Dictionary. • Usually but not necessarily appointed from the Board • Appointees usually knowledgeable about the area.

27. WHY BOARD COMMITTEES? Board is authorized to form committees: • To enhance focus on Board’s oversight function. • Allow more professional handling of issues • More time to study/discuss subjects. • Facilitate participation of all.

28. TYPES OF COMMITTEES • Standing committees; statutory or otherwise. • Adhoc committees • Under the above, there are: • Operational committees • Oversight committees • Best practice committees.

29. COMMON TYPES OF COMMITTEES • Audit committee • Finance/investment /administration committees • Human resources committee • Enterprise risk management committee • Nominations committee • Corporate governance committee • Executive committee • Compensations committee • Research and development committee • Procurement committee.

30. POWERS OF COMMITTEES • Board determines powers, TOR and tenure • Powers of final execution • Powers of partial/interim execution. • Powers to study and report • Powers to coopt specialized skills.

31. COMMITTEE WORK PLANS Good practice to have work plans: • To clarify and prioritize committee objectives • Determine procedures/ processes to achieve objectives • Assign duties and fix time frames • Determine and procure resources for assignment • Evaluate performance against desired outputs.

32. RELATIONSHIPS IN ORGANISATIONS These can make or break organisations. They include: • Relationships within the Board • Relationships between Board, Committees and Management • Relationships within and across departments. • Interpersonal relationships among staff • Relationships between supervisors and the supervised. • Relationships between different generations and gender.

33. RELATIONSHIPS WITHIN THE BOARD • Directors come with ego and sensitivities. • Fears, expectations and envy. • Inferiority or Superiority complexes • Agendas to fight or support status quo. • These dynamics influence relationships.

34. RELATIONSHIPS…CONT’D Dynamics can be triggered by: Communication or lack of it, through: • Facial appearance • Manner of speech or voice • Non response • Body language, and use of things • Affiliation: -history, friends, school, clubs, church, etc.

35. RELATIONSHIPS BETWEEN BOARD AND COMMITTEES • Committees are answerable to Board. • Yet sometimes conflicts arise. • Independence of Audit committee necessary • Members of Audit not deployed in operations. • Avoid self incriminating situations. • Board Chair not voting member ( except in Excom).

36. RELATIONSHIPS IN ORGANISATIONS…CONT’D Board and management • Different but complementary roles and responsibilities. • Is board dis-engaged, unavailable or micromanaging? • Does board observe or cross boundaries of communication? • Can directors articulate Vision,Mission, Values? • Are directors clear about expectations of them? • Is communication/feedback effective as intended?

37. SOFT SKILLS / PEOPLE SKILLS • Business and employment landscape has transformed • Traditional blue collar jobs have shrunk • Jobs have followed comparative advantages • Service sector assumed prominence • Soft (more than hard) skills in demand • Consequently board and HRM must re-focus.

38. SOFT SKILLS… CONT’D Managing Different Generations Generation “Y” is here to stay: • Ambitious , confident, independent, anti-protocol and selfish. • Innovative, tech savvy and globally aware • Poor time keeping yet impatient and bored • They focus on outcomes; not processes. • On the move; no permanent relationship • Demand to know; hence frequent “why”?

39. SOME COMMON SOFT SKILLS • Good communication through Time, Space, Things. • Empathy and Inspiring team player skills • Positive and flexible attitudes • Strong work ethic even under pressure • Problem solving skills • Accepts mistakes and learns from criticisms.

40. CONCLUSION: DIRECTORS BE WARNED • Board membership has evolved drastically. • No longer an honour without obligations. • Position now demands time, knowledge, commitment. • Demands strategic, not short term thinking. • Increasing shareholder/stakeholder awareness and activism • Increasingly there are legal suits and liabilities. • Laws/regulations tightened for higher performance.

41. CONCLUSION…Cont’d 1. “ Remuneration and incentive packages have encouraged short-term thinking. We need to ask what inhibited bank boards from asking the right questions and understanding the risks that were being run by their management”. Richard Aitken Davies, President of the Association of Chartered Certified Accountants saw the credit crunch as a direct product of poor corporate governance. 2. “ In the current climate there is likely to be more focus on whether directors and shareholders are meeting their respective Corporate Governance responsibilities.” - Vanessa Knapp of Fresh fields Bruckhaus Derringer LLP.

42. ☺ THANK YOU