10 Principles of corporate governance | Ethical Boardroom (2023)

10 Principles of corporate governance | Ethical Boardroom (1)By Kimberly Erriah-Ali –Group General Counsel and Corporate Secretary, Republic Bank Limited and Republic Financial Holdings Limited

On December 16, 2015, Republic Financial Holdings Limited (RFHL) was established in order to facilitate the restructuring of the Republic Group. This restructuring ensured that Republic Bank Group is in line with international best practices to facilitate future growth.

Following this change, RFHL became the parent company for several subsidiaries, including the following banks: Republic Bank Limited (formerly Fincor); Republic Bank (Barbados) Limited; Republic Bank (Grenada) Limited; Republic Bank (Guyana) Limited; Republic Bank (Cayman) Limited; Republic Bank (Ghana) Limited and Republic Bank (Suriname) N.V.

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The Board of Directors of RFHL continues to be committed to maintaining the highest standards of corporate governance. To this end, there is continuous monitoring and updating of Republic Bank’s internal systems in order to ensure standards reflect best international practice, tailored to the specific needs of the members of the Group. In this regard, RFHL has adopted the Trinidad and Tobago Corporate Governance Code on the ‘apply or explain’ basis.

RESPONSIBILITIES

The Group has 10 principles of corporate governance that summarise the objectives of the Board and provide a framework for the manner in which it functions and discharges its responsibilities. These principles support the Board’s aim of promoting strong, viable, competitive corporations and are in line with the Group’s core values of integrity, professionalism, customer focus, respect for the individual and results orientation.

The 10 principles are:

1. Lay solid foundations for management and oversight.

The Board is responsible for:

  • Oversight of the Bank, including its control and accountability systems
  • Appointing and removing the managing Director, deputy managing Director, executive Directors and senior management
  • Formulation of policy
  • Input into and final approval of management’s development of corporate strategy and performance objectives
  • Reviewing and ratifying systems of risk management and internal compliance and control, codes of conduct and legal compliance
  • Monitoring senior management’s performance and implementation of strategy, and ensuring appropriate resources are available
  • Approving and monitoring financial and other reporting
  • Approving and monitoring the progress of major capital expenditure, capital management and acquisitions and divestitures
  • Approving credit facilities in excess of a defined amount
  • Updating and maintaining organisational rules and policies to keep in step with changes in the banking industry

This framework for management and oversight is designed to:

  • Enable the Board to provide strategic guidance for the Bank and effective oversight of management
  • Clarify the respective roles and responsibilities of Board members and senior executives in order to facilitate Board and management accountability to both the Bank and its shareholders
  • Ensure a balance of authority so that no single individual has unfettered powers

2. Structure the Board to add value

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The Group must ensure that there is a balance of independence, diversity of skills, knowledge, experience, perspective and gender among the Directors. It should have a Board of an effective composition, size and commitment to adequately discharge its responsibilities and duties. The Board is structured in such a way that it:

  • Has a proper understanding of, and competence to deal with, the current and emerging issues of the business
  • Can effectively review and challenge the performance of management and exercise independent judgement

3. Promote ethical and responsible decision-making

The Board ensures that the Bank promotes ethical and responsible decision-making and complies with all relevant policy, laws, regulations and codes of best business practice using the Group’s ethics and operating principles. The ethics and operating principles address the following matters: conflicts of interest, corporate opportunities, confidentiality, fair dealing, protection of and use of the Group’s assets, compliance with laws and regulations and encouraging the reporting of unlawful/unethical behaviour.

4. Safeguard integrity in financial reporting

The Board has a structure in place to independently verify and safeguard the integrity of the holding company’s financial reporting, including the internal audit department headed by the chief internal auditor and the establishment, as required by law, of the audit committee, to which the chief internal auditor reports.

The existence of an independent audit committee is recognised internationally as an important feature of good corporate governance and is required by the Financial Institutions Act.

The Group’s internal audit is also governed by a charter, which sets out the roles and responsibilities of internal audit, the professional standards by which it is to be governed, the staff’s authorities and organisation and emphasises the independence of internal audit in the Bank’s organisational structure. Each audit committee is also guided and governed by its own terms of reference.

5. Make timely and balanced disclosure

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The Board shall promote timely and balanced disclosure of all material matters concerning the Bank. To achieve this the Bank has put in place structures designed to ensure compliance with the relevant legislation and to ensure accountability at a senior management level for that compliance, such that:

  • All investors have equal and timely access to material information concerning the Bank – including its financial situation, performance, ownership and governance
  • Bank announcements are factual and presented in a clear and balanced way. ‘Balance’ requires disclosure of both positive and negative information

6. Respect the rights of shareholders

The Board respects the rights of shareholders and facilitates the effective exercise of those rights. To this end, the Board has a responsibility, for ensuring that a satisfactory dialogue with shareholders takes place. In furtherance of this responsibility the Board empowers the shareholders by:

  • Communicating effectively with them
  • Giving them ready access to balanced and understandable information about the Bank
  • Making it easy for them to participate in general meetings

7. Recognise and manage risk10 Principles of corporate governance | Ethical Boardroom (2)

The Board has a responsibility to review the adequacy and effectiveness of the bank’s risk management strategies and review and approve the Bank’s risk management framework. To achieve this, the Group has developed an enterprise risk management policy and a risk appetite statement that governs the manner in which risk is managed in the Group. In addition, there is a Group chief risk officer as well as the enterprise risk committee (ERC). The Group chief risk officer and the ERC make recommendations and the Board approves and implements:

  • The Bank’s risk appetite framework, tolerance, limits and mandates, taking into account the Bank’s capital adequacy and the external risk environment
  • Strategic or material transactions, focussing on risk and implications for the risk appetite and tolerance of the bank
  • Oversight and maintenance of a supportive risk culture throughout the Bank
  • Risk assessment, including risk assessment processes, identifying and managing risk and monitoring and understanding the risk profile of the Bank
  • Risk monitoring and reporting, including adequacy and effectiveness of the technology infrastructure
  • Risk management function

8. Encourage enhanced performance

The Board is committed to encouraging enhanced Board and management effectiveness through periodic performance evaluations and reviews. The Board also ensures that Directors and key executives are equipped with the knowledge and information they need to discharge their responsibilities effectively.

Management is required to supply the Board with information in a form, time frame and quality that will enable the Board to discharge its duties and responsibilities. When needed, the Board has access to the advice of both in-house counsel, the Bank’s external counsel and other independent professional advice, if necessary.

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9. Remunerate fairly and responsibly

The Board shall ensure that the level and composition of remuneration is sufficient and reasonable and that its relationship to corporate and individual performance is defined. To achieve this, the Bank has adopted remuneration policies that attract and maintain talented and motivated employees so as to encourage enhanced performance of the Bank. It is important that there is a clear relationship between performance and remuneration. The Bank has designed its remuneration policy in such a way that it:

  • Motivates management to pursue the long-term growth and success of the Bank within an appropriate control framework
  • Demonstrates a clear relationship between key executive performance and remuneration

10. Recognise the legitimate interests of stakeholders

The Bank is subject to a number of legal requirements that affect the way business is conducted. These include contractual requirements, banking practice, compliance, consumer protection, respect for privacy, employment law, occupational health and safety, equal employment opportunity and environmental controls.

In addition to its obligation to its stakeholders, the Bank has other obligations to non-shareholders such as employees, customers and the community as a whole.

The Board has a responsibility to set the tone and standards with respect to the corporate social responsibility of the Bank and to oversee adherence to these. The Group’s ethics and operating principles, which state the value and policies of the Bank assists the Board in this task and acts as a guide for employees and management in conducting business and general behaviour.

About the Author:

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Kimberly Erriah-Ali is Group General Counsel and Corporate Secretary, Republic Bank Limited and Republic Financial Holdings Limited, is an attorney-at-law with 20 years of experience; having received her Bachelor of Laws (LL.B) (Hons.) from the University of the West Indies, and her Legal Education Certificate from The Sir Hugh Wooding Law School, Trinidad, Ms. Erriah was admitted to practice as an Attorney-at- Law in the Supreme Court Trinidad and Tobago in 1998. She has served as Corporate Secretary on the Board of Republic Bank (Grenada) Limited and has served as Corporate Secretary to Republic Bank subsidiaries: Republic Finance and Merchant Bank Limited and London Street Project Company Limited.

Ms. Erriah holds an MBA from the Heriot-Watt University, with electives in Mergers & Acquisitions and Corporate Governance, is certified under the Association of Certified Anti-Money Laundering Specialists (ACAMS), and is a Certified Practitioner in Anti-Money Laundering from the Florida Institute of Bankers Association via Florida International University. She brings to bear a wide range of expertise in Corporate and Commercial Law, Conveyancing, Trusts, Landlord and Tenant Law, Intellectual Property, Estates, and Litigation.

FAQs

What are the 7 principles of corporate governance? ›

The principles of Corporate Governance are:
  • Accountability. Accountability means to be answerable and be obligated to take responsibility for one's actions. ...
  • Fairness. ...
  • Transparency. ...
  • Independence. ...
  • Social Responsibility.

What are the 8 principles of corporate governance? ›

The 8 P's of corporate governance are:
  • Property;
  • Principles;
  • Purpose;
  • Roles;
  • Power;
  • Practice;
  • People;
  • Permanence.
Mar 10, 2020

What are the 4 P's of corporate governance? ›

People, process, performance, and purpose are the four Ps of good corporate governance.

What are the 10 principles of good governance? ›

The 10 principles are:
  • Lay solid foundations for management and oversight. ...
  • Structure the Board to add value. ...
  • Promote ethical and responsible decision-making. ...
  • Safeguard integrity in financial reporting. ...
  • Make timely and balanced disclosure. ...
  • Respect the rights of shareholders. ...
  • Recognise and manage risk.
Aug 21, 2019

What are the 6 principles of corporate governance? ›

The Principles cover six key areas of corporate governance – ensuring the basis for an effective corporate governance framework; the rights of shareholders; the equitable treatment of shareholders; the role of stakeholders in corporate governance; disclosure and transparency; and the responsibilities of the board (see ...

What are the 8 elements of good governance? ›

According to the United Nations, Good Governance is measured by the eight factors of Participation, Rule of Law, Transparency, Responsiveness, Consensus Oriented, Equity and Inclusiveness, Effectiveness and Efficiency, and Accountability.

What are corporate principles? ›

The basic principles of corporate governance are accountability, transparency, fairness, responsibility, and risk management.

What are the three basic principles of effective corporate governance? ›

The three pillars of corporate governance are: transparency, accountability, and security. All three are critical in successfully running a company and forming solid professional relationships among its stakeholders which include board directors, managers, employees, and most importantly, shareholders.

What are the 7 principles of corporate governance PDF? ›

  • General principles. ...
  • Board of Directors, audit and nomina-
  • Remuneration to the board of directors. ...
  • Remuneration to executive management.
  • Matters related to capital structure. ...
  • Public offers. ...
  • Corporate social responsibility (CSR)
  • Objective of the company –

What are the 16 principles in the corporate governance code for publicly listed companies? ›

  • Establishing a Competent Board.
  • Establishing Clear Roles and Responsibilities.
  • Establishing Board Committees.
  • Fostering Commitment.
  • Reinforcing Board Independence.
  • Assessing Board Performance.
  • Strengthening Board Ethics.
  • Enhancing Company Disclosure Policies and.

What makes a strong corporate governance? ›

What makes good corporate governance effective? Good corporate governance practices are effective because they are based on organisation, transparency, accountability and strategic planning. These elements breed confidence and trust in investors and other stakeholders, provide risk oversight and help prevent scandals.

What are the models of corporate governance? ›

Three dominant models exist in contemporary corporations: the Anglo-US model, the German model, and the Japanese model. In one sense, the differences between these systems can be seen in their focuses. The Anglo-US model is oriented toward the stock market, while the other two focus on the banking and credit markets.

What is good corporate governance? ›

Good corporate governance means that the processes of disclosure and transparency are followed so as to provide regulators and shareholders as well as the general public with precise and accurate information about the financial, operational and other aspects of the company.

What are the main elements of governance? ›

Ethics, risk management, compliance and administration are all elements of governance.

What are the three legs of governance? ›

Governance has three legs: economic, political and administrative. Economic governance includes decision-making processes that affect a country's economic activities and its relationships with other economies.

What are the types of governance? ›

Types
  • Governance as process.
  • Public governance.
  • Private governance.
  • Global governance.
  • Governance Analytical Framework.
  • Nonprofit governance.
  • Corporate governance.
  • Project governance.

What is the main purpose of corporate governance? ›

The purpose of corporate governance is to facilitate effective, entrepreneurial and prudent management that can deliver the long-term success of the company. Corporate governance is the system by which companies are directed and controlled. Boards of directors are responsible for the governance of their companies.

What are the 7 principles of corporate governance PDF? ›

  • General principles. ...
  • Board of Directors, audit and nomina-
  • Remuneration to the board of directors. ...
  • Remuneration to executive management.
  • Matters related to capital structure. ...
  • Public offers. ...
  • Corporate social responsibility (CSR)
  • Objective of the company –

What are the five principles of corporate governance? ›

The basic principles of corporate governance are accountability, transparency, fairness, responsibility, and risk management.

What are the three basic principles of effective corporate governance? ›

The three pillars of corporate governance are: transparency, accountability, and security. All three are critical in successfully running a company and forming solid professional relationships among its stakeholders which include board directors, managers, employees, and most importantly, shareholders.

What are the 16 principles in the corporate governance code for publicly listed companies? ›

  • Establishing a Competent Board.
  • Establishing Clear Roles and Responsibilities.
  • Establishing Board Committees.
  • Fostering Commitment.
  • Reinforcing Board Independence.
  • Assessing Board Performance.
  • Strengthening Board Ethics.
  • Enhancing Company Disclosure Policies and.

What is good corporate governance? ›

Good corporate governance means that the processes of disclosure and transparency are followed so as to provide regulators and shareholders as well as the general public with precise and accurate information about the financial, operational and other aspects of the company.

What is a corporate governance framework? ›

It lays down the key responsibilities of the Board of the SSRO; the conduct expected of its members and staff; the Board's powers of delegation; and the proceedings of the Board. It reflects the principles set out in Corporate governance in central government departments: code of good practice.

Why are corporate governance principles important? ›

Good corporate governance is particularly important for publicly traded companies because large amounts of money are invested in them, either by 'small' shareholders or from pension schemes and other financial institutions.

What are 7 pillars of good governance? ›

  • Health and Social Services;
  • Peace and Development;
  • Education;
  • Economic Services;
  • Infrastructure Supports;
  • Environmental Management ; and.
  • Local Administration and Governance.
Nov 19, 2012

What are the main elements of governance? ›

Ethics, risk management, compliance and administration are all elements of governance.

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