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The importance of “independents” on the supervisory board

This article discusses the significance of having independent board members on the supervisory board. It highlights the role of independent members in providing constructive challenges to management decisions and ensuring independent oversight. The article also explores the qualifications, nature of independence, and induction and evaluation processes for board members. Additionally, it mentions the Slovak Corporate Governance Code and EU recommendations on supervisory board members.

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The importance of “independents” on the supervisory board

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  1. The importance of “independents” on the supervisory board Jennie Mills Jennie S. Mills Milford International Associates Ltd

  2. Slovak Corporate Governance • Slovak Corporate Governance Code 2002 based on OECD Principles 1999 • Annex 1. Board Committees 2003 • The ROSC Assessment 2003 • Annex 2. The Role of the boards Jennie S. Mills Milford International Associates Ltd

  3. EU Developments • The Corporate Governance Action Plan • The Recommendation on supervisory board members October 2004 • The Recommendation on remuneration of board members October 2004 Jennie S. Mills Milford International Associates Ltd

  4. EU Recommendation on supervisory board members • Comply and explain approach endorsed • Role of independent is to constructively challenge management decisions & provide independent oversight • Sound CG practices benefit business, large and small, family owned as well as listed companies Jennie S. Mills Milford International Associates Ltd

  5. Oversight critical where conflicts of interest exist • Nomination of board members • Remuneration • Audit • Other benefits important also • Particular experience/ skills • Objective & fresh perspective • Contacts Jennie S. Mills Milford International Associates Ltd

  6. Slovak Code on Board Committees • Committees of SB • Audit: 3-5 members mainly or wholly independent to meet at least 4 times per annum. • Remuneration: composition as above, meetings twice p.a. • Nomination: composition as above, meetings four times p.a. Jennie S. Mills Milford International Associates Ltd

  7. Qualification of supervisory board members • Each Co must determine this itself • Depends on size, activities & environment • Specific qualifications • Critical that each can devote sufficient time to the role • Independence Jennie S. Mills Milford International Associates Ltd

  8. Nature of independence • Absence of close ties, business, family or otherwise with: • Management • Controlling shareholders • The company itself • Annex II gives outline Jennie S. Mills Milford International Associates Ltd

  9. Number of independents • Slovak Code in line with OECD Principles looks to majority of independents on SB over a period of years. • EU Recommendation “sufficient to ensure that any material conflict of interest involving directors will be dealt with” Jennie S. Mills Milford International Associates Ltd

  10. Induction, director development & evaluation • Induction to board & Co • Director development…..”directors are not born but develop” • Evaluation of performance annually for : • Membership • Organisation • Operation as a group • Includes board committees Jennie S. Mills Milford International Associates Ltd

  11. The Central European Corporate Governance Association • Promote CG • Support board members • Promote potential board members • Assist in director development Jennie S. Mills Milford International Associates Ltd

  12. How to join Contact: • Eva Hornakova at hornakova@bsse.sk • Barbora Lazarova at lazarova@bsse.sk Jennie S. Mills Milford International Associates Ltd

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