Corporate Governance

Corporate governance is the system by which companies are directed and controlled. The corporate governance structure specifies the distribution of rights and responsibilities among the board of directors, managers, shareholders and other stakeholders such as employees, suppliers and customers.

By law, the day to day management of companies is in the hands of the boards of directors. The board of directors comprises both executive and non-executive directors. Executive directors are actively involved the management of the company whereas non-executive directors, principally of listed companies, have been relied on to plugs the monitoring gap where a large number of investors cannot practically police the actions of senior management.

It is desirable in listed companies that the Chairman who runs board meetings and supervises oversight of the company and stakeholders relations is separate from the Chef Executive or Managing Director. The board is led by a chairman who is usually a non-executive director under the singled tier board system.

The law requires directors to act in good faith in the best interests of the company and to act as agents of the shareholders (owners) and comply with Company Law requirements. Shareholders can elect and remove directors from the board in annual general meetings.

It is important to note that under the company law, directors must include a statement of directors’ responsibilities in the annual accounts, for audited accounts the statement is to be included on the director report page whereas for non- audit companies, the statement required to be on the balance sheet page.

The differences between public companies and private companies are summarized in the table below which provides at a glance the legal structure and their respective corporate governance.

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