10 Principles of corporate governance | Ethical Boardroom (2022)

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 principles of corporate governance explain in detail? ›

Corporate governance covers the areas of environmental awareness, ethical behavior, corporate strategy, compensation, and risk management. The basic principles of corporate governance are accountability, transparency, fairness, responsibility, and risk management.

What are the 7 principles of corporate governance? ›

The elements of corporate governance are:
  • Transparent disclosure.
  • Well-defined rights of shareholders.
  • Internal control environment.
  • Structured Board practices.
  • Board commitment.

What is corporate governance Mcq? ›

“Corporate governance means that company manages its business in manner that is. accountable and responsible to the shareholders.

What is the most important principles of good governance? ›

Good governance requires fair legal frameworks that are enforced impartially. It also requires full protection of human rights, particularly those of minorities. Impartial enforcement of laws requires an independent judiciary and an impartial and incorruptible police force.

What is corporate governance in simple words? ›

Corporate governance is based on a set of rules, bylaws, policies and procedures to ensure company accountability. When done correctly, it establishes a framework for attaining a company's objectives in all spheres of management. It also recognizes the importance of shareholders.

What are the 8 principles of good governance? ›

Citing from the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP), the concept of good governance has eight principles.
  • Participation. ...
  • Rule of law. ...
  • Transparency. ...
  • Responsiveness. ...
  • Consensus oriented. ...
  • Equity and inclusiveness. ...
  • Effectiveness and efficiency. ...
  • Accountability.
18 Nov 2021

What are the 5 principles of good governance? ›

12 Principles of Good Governance:
  • Participation, Representation, Fair Conduct of Elections.
  • Responsiveness.
  • Efficiency and Effectiveness.
  • Openness and Transparency.
  • Rule of Law.
  • Ethical Conduct.
  • Competence and Capacity.
  • Innovation and Openness to Change.

What are the 6 major principles? ›

4. Summarize What are the six underlying principles of the Constitution? The six underlying principles of the Constitution are popular sovereignty, federalism, separation of powers, checks and balances, judicial review, and limited government.

What are the six principles of good governance? ›

Guide to principles of good governance
  • Independence.
  • Openness and transparency.
  • Accountability.
  • Integrity.
  • Clarity of purpose.

What are the 4 governance principles? ›

The board of directors must act following the four principles of governance — accountability, transparency, fairness and responsibility — for the best interest of stakeholders, shareholders and the business as a whole.

What are the two types of corporate governance? ›

Two common systems are dispersed control and concentrated systems. Dispersed systems are also known as market-based corporate governance, since these organizations have typically sold shares to investors who have an ownership in the business.

What is governance short answer? ›

Governance is the process of interactions through the laws, norms, power or language of an organized society over a social system (family, tribe, formal or informal organization, a territory or across territories). It is done by the government of a state, by a market, or by a network.

What are the 3 models of corporate governance? ›

There are three main models of leadership on which the corporate governance theory is based: the Anglo-Saxon, the Continental and the Japanese model.

What is the 16 good governance? ›

SDG 16 (“Promote just, peaceful and inclusive societies”) explicitly acknowledges this need and prescribes “effective, accountable and inclusive institutions at all levels.” These requirements go well beyond the performance-oriented notion of good governance and hint to democratic standards.

What is valid governance class 10? ›

Complete answer: Good governance means ruling, fighting corruption, enforcement of laws, contract fairly and respecting human rights, property rights.

What is governance write in your own words? ›

Governance encompasses the system by which an organisation is controlled and operates, and the mechanisms by which it, and its people, are held to account. Ethics, risk management, compliance and administration are all elements of governance.

What is the first principle of good governance? ›

Principle 1

Citizens are at the centre of public activity and they are involved in clearly defined ways in public life at local level. All men and women can have a voice in decision-making, either directly or through legitimate intermediate bodies that represent their interests.

What qualities make a good governance? ›

Good governance has nine major characteristics:
  • Participation.
  • Consensus oriented.
  • Accountability.
  • Transparency.
  • Responsive.
  • Effective and efficient.
  • Equitable and inclusive.
  • Follows the rule of law.
15 Aug 2018

What makes a good governance structure? ›

Good governance includes identifying a vision, developing a strategy, selecting and supporting a leadership to deliver that strategy, assurance that progress is being made, the stewardship of resources, and the guardianship of quality and safety – all done to the highest standards of probity and transparency.

Why good governance is important? ›

Good governance has many benefits

It can reduce risks, and enable faster and safer growth. It can also improve reputation and foster trust. All these benefits mean your business is more likely to last in the long term.

What is the main objective of corporate governance? ›

The purpose of corporate governance is to help build an environment of trust, transparency and accountability necessary for fostering long-term investment, financial stability and business integrity, thereby supporting stronger growth and more inclusive societies.

What is good corporate governance examples? ›

Examples of good corporate governance practices include:
  • Calculation of the company's carbon footprint;
  • Respect for human rights in the company;
  • Transparency of executive salaries;
  • Implementation of a code of conduct for employees.
23 Aug 2021

What are the 7 principles in order? ›

The Constitution reflects seven basic principles. They are popular sovereignty, limited government, separation of powers, checks and balances, federalism, republicanism, and individual rights.

What are the 3 important principles? ›

The three principles are often translated into and summarized as nationalism, democracy, and the livelihood of the people.

What are the 5 core principles? ›

Once you've decided that capacity is lacking, use principles 4 and 5 to support the decision-making process.
  • Principle 1: A presumption of capacity. ...
  • Principle 2: Individuals being supported to make their own decisions. ...
  • Principle 3: Unwise decisions. ...
  • Principle 4: Best interests. ...
  • Principle 5: Less restrictive option.

How do you maintain good governance? ›

The requirements of good governance must be fulfilled each time when a civil servant makes an administrative decision or a municipality provides services. These requirements include good service, handling matters in an interactive way, openness, the realisation of legal rights and obligations, and flexible procedures.

Who is responsible for corporate governance? ›

Corporate governance is the system by which companies are directed and controlled. Boards of directors are responsible for the governance of their companies. The shareholders' role in governance is to appoint the directors and the auditors and to satisfy themselves that an appropriate governance structure is in place.

What are governance controls? ›

Governance controls allow System Admins to customize their organization's requirements for compliance and data governance. These powerful controls provide expanded governance capabilities that make it easier for System Admins to set and enforce policy restrictions.

What is a governance example? ›

Governance bodies are accountable for compliance to laws and regulations. For example, a compliance body may direct management to achieve compliance to a new regulation and monitor compliance on an ongoing basis.

What are governance issues? ›

Major corporate governance issues include:

Fairness – Stakeholders at all levels should be treated equitably and reasonably. Violations should be redressed effectively. Transparency – the organisation should not need to keep secrets. Outsiders should be able to observe the organisation's transactions and processes.

How many types of corporate governance are there? ›

There are three types of governance structures including, internal and external mechanisms and independent audits. Internal mechanisms establish reporting lines and performance measures that help monitor an organization's activities to ensure the business stays on track.

What are the 8 principles of 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 the 4 P's of corporate governance? ›

That's why many governance experts break it down into four simple words: People, Purpose, Process,and Performance. These are the Four Ps of Corporate Governance, the guiding philosophies behind why governance exists and how it operates. Let's have a look at exactly what each of the Ps means.

What are the 5 principles of good governance? ›

12 Principles of Good Governance:
  • Participation, Representation, Fair Conduct of Elections.
  • Responsiveness.
  • Efficiency and Effectiveness.
  • Openness and Transparency.
  • Rule of Law.
  • Ethical Conduct.
  • Competence and Capacity.
  • Innovation and Openness to Change.

What are the six 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 is the 16 good governance? ›

SDG 16 (“Promote just, peaceful and inclusive societies”) explicitly acknowledges this need and prescribes “effective, accountable and inclusive institutions at all levels.” These requirements go well beyond the performance-oriented notion of good governance and hint to democratic standards.

What are the 7 key ethical principles? ›

The principles are beneficence, non-maleficence, autonomy, justice; truth-telling and promise-keeping.

What are the 4 basic principle? ›

The principle of upholding the socialist path. The principle of upholding the people's democratic dictatorship. The principle of upholding the leadership of the Chinese Communist Party (CCP) The principle of upholding Mao Zedong Thought and Marxism–Leninism.

What are the 4 C's and 4Ps? ›

The 4Ps of product, price, place, and promotion refer to the products your company is offering and how to get them into the hands of the consumer. The 4Cs refer to stakeholders, costs, communication, and distribution channels which are all different aspects of how your company functions.

What is corporate governance in simple words? ›

Corporate governance is based on a set of rules, bylaws, policies and procedures to ensure company accountability. When done correctly, it establishes a framework for attaining a company's objectives in all spheres of management. It also recognizes the importance of shareholders.

What are the three main components of corporate governance? ›

The three main components of corporate governance are transparency, accountability, and security.

What are the six elements of good governance? ›

It uses six dimensions of governance for their measurements, Voice & Accountability, Political Stability and Lack of Violence, Government Effectiveness, Regulatory Quality, Rule of Law, and Control of Corruption.

Why are principles of good governance important? ›

Good governance enables organisations to build a sustainable, better future for all of us. It's the duty of board members to remain focused on broad, strategic goals while tackling day-to-day issues and meeting their responsibilities, so it's incumbent on them to work with certain governance ideals in mind.

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