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News update

Q&A with Governance Institute

Each month in our News Update, the Governance Institute will answer some common questions about governance and risk management.

A. How do companies manage auditors’ access to board papers? Do companies allow auditors to download papers?

Q. Most companies manage auditors’ access to board papers carefully. Some companies limit the auditors’ ability to print documents and their ability to upload documents, unless required for the audit. This is typically managed on a case-by-case basis. Companies also provide access to minutes through a document room in a board portal. Some companies also maintain a register of documents provided and not provided to the auditors. Another option is to grant read-only access to the auditors through a board portal.

A. I have more than a dozen companies in my Australian corporate group, of which the directors are the same for both the holding/parent company, and each of our wholly owned subsidiaries. This allows us to have ‘group joint’ board meetings for all entities in one meeting. How do other companies structure their subsidiary boards and hold meetings?

Q. In some groups, companies are organised as sole purpose subsidiaries with management as directors of the subsidiary boards and circular resolutions can be used as the decision-making mechanism. Another approach is to conduct subsidiary board meetings as a ‘group’ meeting at the parent company board meeting. Where there are common directors, it is possible to use a structured agenda setting out clearly and documenting exactly what was decided. In other cases, it may be easier to hold separate meetings for each entity. However, even where separate meetings are held, some groups with few common directors, for example, in the aged care and health services sector, convene a monthly meeting of all group companies. Another approach in a group with common directors across all subsidiaries is to hold one longer meeting for all group companies. This would enable common items across all companies to be dealt with first, followed by the items relevant to each company. This approach typically requires separate board papers for each company, particularly for regulated entities. It can take time to develop a suitable board paper template for this approach.

Q. Our company has appointed a new UK based Chair recently and the question of having a deputy chair or senior independent director has come up in discussion. What would be their main responsibilities and how would you deal with the question of fees?

A. The concept of a senior independent director originally came from the UK Corporate Governance Code. The 2024 UK Corporate Governance Code also includes references to a senior independent director who can act as a sounding board for the chair and serve as an intermediary for the other directors and shareholders. The Code also suggests that the non-executive directors, led by the senior independent director, ‘should meet without the chair present at least annually to appraise the chair’s performance, and on other occasions as necessary’.

The 4th edition of the Corporate Governance Principles and Recommendations refers to a senior independent director in the context of situations where the chair is not an independent director. Recommendation 2.5 notes that in this case, listed companies should consider appointing an independent director as the deputy chair or as the ‘senior independent director’, who can fulfil the role whenever the chair is conflicted. It notes that even where there is an independent chair, a deputy chair or senior independent director can also assist the board in reviewing the performance of the chair and in providing a separate channel of communication for shareholders, particularly where those communications concern the chair. They can also act as an intermediary between the other directors and the chair. A senior independent director can also assist in succession planning for the chair.

Where a company has a deputy chair or senior independent director their roles and responsibilities should be set out in the board charter. There would also need to be a discussion about the appropriate additional fees payable.

Not-for-profit Good Governance Guide

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