Skip to main content

Combined Code on Corporate Governance: Appointment of directors

This is quite interesting in Combined code on Corporate Governance, UK.

Induction and training for directors

The authors of the Code believe that new directors have to be properly trained. This means an effective induction process when the director joins the board and an on-going programme of professional development. In the words of main principle A.5, directors should “regularly update and refresh their skills and knowledge”. (If they do not they cannot possibly hope to keep up with the pace of legislative and regulatory change. The new code of directors’ duties in the Companies Act 2006 – see the section on Directors' duties – is only one recent development.)


“The company,” says the Code, “should provide the necessary resources for developing and updating its directors’ knowledge and capabilities”. Note also the obligation in Listing Principle 1: “A listed company must take reasonable steps to enable its directors to understand their responsibilities and obligations as directors.

Paula

Source: Paula

The essential point is that directors must be given the right “equipment” and get the right preparation to do their jobs/discharge their duties. There is reference to “tailored induction”. Thus the Code recommends that new non-executives get the chance to meet major shareholders as part of their induction process (A.5.1) and that “consideration should be given to visiting sites and meeting senior and middle management” (Higgs' Suggestions for Good Practice).


For all directors, the right “equipment” includes “accurate, timely and clear information”. The company secretary, under the direction of the chairman, must, say the supporting principles, ensure “good information flows within the board and its committees and between senior management and non-executive directors”.


The words “clear” and “good” here are sometimes forgotten when directors are first appointed. Companies can tend to overburden an individual. As ICSA says in its guidance notes on the induction process, “it has become apparent that some newly appointed directors have been completely overwhelmed with the sheer volume of documents and other papers provided by the well meaning company secretary to such an extent that some have been completely put off by it”. To avoid this, ICSA suggests giving the director essential information only on their appointment and providing further necessary information in the subsequent few weeks. Subsidiary information can follow once the first two batches have been digested.


The company should also be prepared to pay for independent professional advice where the directors judge it necessary.


Source: Out-Law

Do you like to be updated in Accountancy ?
Subscribe to Management Accountant by Email


Or

Subscribe in a reader


You may also like to read
  1. Protecting the term "Accountant"
  2. The word "Chartered" - debate in India
  3. Definition of Professional Body
  4. Cost Audit Awareness in India
Post a Comment

Popular posts from this blog

Throughput Accounting

Throughput accounting (TA) is an alternative to cost accounting proposed by Eliyahu M. Goldratt. It is not based on Standard Costing or Activity Based Costing (ABC). Throughput Accounting is not costing and it does not allocate costs to products and services. It can be viewed as business intelligence for profit maximization. Conceptually throughput accounting seeks to increase the velocity at which products move through an organization by eliminiating bottlenecks within the organization.


Cost (or Management) accounting is an organization's internal method used to measure efficiency. Since no one outside the organization uses such internal accounts for investment or other decisions, any methods that an organization finds helpful can be used.


Throughput accounting improves profit performance with better management decisions by using measurements that more closely reflect the effect of decisions on three critical monetary variables (throughput, inventory, and operating expense — defin…

Learning Curve Theory

Learning Curve Theory is concerned with the idea that when a new job, process or activity commences for the first time it is likely that the workforce involved will not achieve maximum efficiency immediately. Repetition of the task is likely to make the people more confident and knowledgeable and will eventually result in a more efficient and rapid operation. Eventually the learning process will stop after continually repeating the job. As a consequence the time to complete a task will initially decline and then stabilise once efficient working is achieved. The cumulative average time per unit is assumed to decrease by a constant percentage every time that output doubles. Cumulative average time refers to the average time per unit for all units produced so far, from and including the first one made.

Major areas within management accounting where learning curve theory is likely to have consequences and suggest potential limitations of this theory.


Areas of consequence:
A Standard Costing

Resistence to Change - Approaches of Kotter and Schlesinger

The Six (6) Change Approaches of Kotter and Schlesinger is a model to prevent, decrease or minimize resistance to change in organizations.
According to Kotter and Schlesinger (1979), there are four reasons that certain people are resisting change: Parochial self-interest (some people are concerned with the implication of the change for themselves ad how it may effect their own interests, rather than considering the effects for the success of the business)Misunderstanding(communication problems; inadequate information)Low tolerance to change (certain people are very keen on security and stability in their work)Different assessments of the situation (some employees may disagree on the reasons for the change and on the advantages and disadvantages of the change process) Kotter and Schlesinger set out the following six (6) change approaches to deal with this resistance to change: Education and Communication - Where there is a lack…