Governance:　　Directors
　　(a)Chairman
　　Running the board and setting its agenda
　　Ensuring the board receives accurate and timely information
　　Ensuring effective communication with shareholders
　　Ensuring sufficient time is allowed for discussion of controversial issues
　　Taking the lead in board development
　　Facilitating board appraisal
　　Encouraging active engagement by all the members of the board
　　Reporting in and signing off accounts
 
　　(b) CEO
　　Business strategy and management
　　Investment and financing
　　Risk management
　　Establishing the company’s management
　　Board committees
　　Liaison with stakeholders
 
　　(c) Division of responsibilities
　　CEO run the company, Chairman run the board and take the lead in liaising withshareholders
　　Chairman carries the authority of the board, CEO has the authority that isdelegated by the board. Unfettered powers is concentrated into on pair of hands
　　Avoiding conflict of interest
　　Board can’t make the CEO accountable for management if it is led by CEO
　　Board is more able to express its concerns effectively by providing a point ofreporting for the NEDs
　　Chairman is responsible for obtaining the information that other directorsrequire to exercise proper oversight and monitor the organizationeffectively
　　Compliance with governance best practice and hence reassures shareholders
 
　　(d) Roles of NEDs
　　Strategy. Contribute to, and challenge the direction of, Strategy
　　Scrutiny. Scrutiny the performance of executive management in meeting goals andobjectives and monitor the reporting of performance.
　　Risk. Financial information is accurate and financial controls and systems ofrisk management are robust.
　　People. Determining appropriate levels of remuneration for executives, and arekey figures in the appointment and removal of senior managers and in successionplanning
　　Contribution of NEDs:
　　Better balanced board(power, skills and experiences)
　　Representing shareholder interests(put shareholders’ viewpoint in board discussion,)
　　Monitoring function(monitors risks, controls and operations effectively, theperformance of executive directors)
 
　　(e) Advantages of NEDs
　　External experience and knowledge which executive directors do not possess.
　　Provide a wider perspective than executive directors
　　A comfort factor for third parties such as investors or creditors
　　Certain roles (father confessor: being a confidant for the chairmanand other directors; oil-can: intervening to make the board run moreeffectively; high-sheriff: if necessary taking steps to remove thechairman or CEO)
　　Full board members who are excepted to have the level of knowledge that fullboard membership implies.
 
　　(f) Problems of NEDs
　　Lack independence (no business, financial or other connection;Cross-directorships; should not take part in share option schemes and theirservice should not be pensionable; Appointments should not be for aspecified term and reappointment should not be automatic; Procedures shouldexist to ensure NEDs take independent advice)
　　Prejudice and against widening the recruitment of NEDs
　　High-calibre NEDs may gravitate towards the best run companies
　　Have difficulty imposing their views upon the board.
　　Not enough emphasis is given to the role of NEDs in preventing trouble
　　Limited time
　　Damage company performance by weakening board unity and stiflingentrepreneurship
 
　　(g) Remuneration package
　　Basic salary(experience, market rate)
　　Performance related bonuses(transaction bonuses; loyalty bonuses)
　　Shares
　　Share options (align management and shareholder interests, particularlyheld for a long time)
　　Benefits in kind (transport/ health provisions / life assurance /holidays / expenses / loans)
　　Pensions
 
　　(h) Remuneration policy
　　Pay scales
　　Proportion of different types of reward
　　Period
　　Be related to measureable performance
　　Balance between short and long-term performance elements
　　Transparency
　　Responsibilities of the board
　　Formal schedule of matters specifically reserved to it for decisionat board meetings
　　Monitoring the CEO
　　Overseeing strategy
　　Monitoring risks, control systems and governance
　　Monitoring the human capital aspects of the company, eg succession, morale,training
　　Monitoring potential conflicts of interest
　　Ensuring that there is effective communication of its strategic plans.
 
　　Nomination Committee
　　(a)Consist mainly of NEDs, to consider:
　　The balance between executive and independent NEDs
　　The skills, knowledge and experience possessed by the current board
　　The need for continuity and succession planning
　　The desirable size of the board
　　The need to attract board members from a diversity or backgrounds
　　(b)Induction
　　Build an understanding of the nature of the company, its business and itsmarkets;
　　Build a link with the company’s people
　　Build an understanding of the company’s main relationship including meetingswith auditors
　　(c) Continuing professional development
　　Extend their knowledge and skills continuously;
　　Concentrate on the role of board, obligations and entitlements of existing directorsand the behaviors needed for effective board performance.
 
　　Audit committee
　　(a)Function
　　Improve the quality of financial reporting
　　Reduce the opportunity for fraud
　　Enable the NEDs continue an independent judgement and play a positive role
　　Help the finance director (raise issues of concern; get difficult things done)
　　Strengthen the position of the external auditor
　　The External auditor can asserthis independence when dispute withmanagement
　　Strengthen the position of the internal auditor
　　Increase public confidence
　　(b) Review of financial statements andsystems
　　Considering performance indicators and information systems that allowmonitoring of the most significant business and financial risks.
　　(c) Liaison with external auditors
　　Being responsible for the appointment or removal of the external auditors
　　Any other threats to external auditor independence (non-audit service; conflictof interest)
　　Discussing the scope of the external audit
　　Acting as a forum for liaison between the external auditors, the IAs and thefinance directors
　　Helping the external auditors to obtain the information
　　Making themselves available to the external auditors for consultant
　　Dealing with any serious reservations.
　　(d)Review of internal audit
　　Standards including objectivity, technical knowledge and professional standards
　　Scope including how much emphasis is given to different types of review
　　Resources (enough hours, personal technical and skills)
　　Reporting arrangements
　　Work plan (review of controls and coverage of high risk areas)
　　Liaison with external auditors
　　Results
　　Relate to external auditor (increase the independence of external auditor; actas liaison person to facilitate the communication between the executivedirectors and external auditors; Act as coordinate the work between externalauditor and internal auditor; To monitor the independence and quality of workof external auditor)
　　Related to internal audit function (To approve the appointment ortermination???? of appointment of the head of internal audit; To review the workof the internal audit function)
　　(e)Review of internal control
　　Monitor the adequacy of internal control systems in mitigating???? risks(control environment, management’s attitude)
　　Cover legal compliance and ethics
　　Address the risk of fraud (report fraud, frand to be investigated)
　　Reviewing the company’s statement on internal controls
　　Consider the recommendation of the auditors in the management letter andmanagement’s response
　　Active supervisory role (review major transactions)
　　(f)Review of risk management
　　Confirming a formal policy in place for risk management, risk management isupdated to reflect current positions and strategy.
　　(g) Independence of internal auditcommittee:
　　Only be effective if NEDs are independence.
　　Crucial to discuss the management’s competence and judgement with the externalauditors, if not, they may feel loyalty towards management
　　Investors’ confidence
　　Reporting of the internal audit committee need the NEDs’ independence,otherwise influence the integrity of the auditors.
 
　　Internal auditors/external auditors comparison of role in the context ofcorporate governance
　　(a)Assess the need for internal audit
　　Scale, diversity and complexity of the company’s operations
　　Number of employees
　　Cost-benefit considerations
　　Changes in organizational structure
　　Changes in key risks
　　Problems with internal control systems
　　Increased number of unexplained or unacceptable events
　　(b)Role of internal audit function
　　Independent checking, examination and *uation the internal control systemestablished by executive director.
　　Internal control over financial reporting
　　FS whether show true and fair
　　Internal control over operation
　　Operational information(management information)
　　Review of “3E”
　　Review of compliance with laws and regulations
　　Review of safeguarding of the organization’s assets
　　Review of implementation of corporate goals and objectives
　　Review of significant risks to the organisation, monitoring risk managementpolicy and risk management strategies.
　　(c) Advantages of appointing internalauditor from outside the company:
　　External appointment would bring detachment and independence (reduce or avoidsthe independence and familiarity threats)
　　An external appointment would help with independence and objectivity. Own nopersonal loyalties nor ‘favours’ from previous positions. Have no personalgrievances nor conflicts with other people. (Increase the confidence ofinvestors)
　　Some benefit would be expected from the “new broom effect’ in that theappointment would see the company through fresh eyes .(bring a fresh pair ofeyes to the task)
　　Come in with new ideas and expertise gained from other situations
　　The possibility exists for the transfer of best practice in from outside.(bestpractice and current developments can be introduced)
　　(d) Review of the risk management
　　Identification. Risks comes and go with the changing nature of businessactivity, and with the continual change in any organization’s environment.
　　Assessment. The probability of the risk being realized; the impact or hazard.
　　Review. Analyses the controls that the organization has.
　　Report. A report on the review is produced and submitted to the principal.
　　(e)Social and environmental audit: Why
　　There is a growing belief that environment issues represent a source of risk interms of unforeseen liabilities, reputational damage, or similar.
　　The ethical performance of a business, such as its social and environmental*, is a factor in some people’s decision to engage with thebusiness in its resource and product markets.
　　An increasing number of investors are using social and environmentalperformance as a key criterion for their investment decisions.
　　(f)Environmental audit: what
　　Is a systematic, documented, periodic and objective *uation of how well anentity, its management and equipment are performing, with the aim of helping tosafeguard the environment by facilitating(??) management control of environmentpractice and assessing compliance with entity policies and externalregulations.