The Guyana Securities Council is promulgating a code of corporate governance for the securities market which calls for specified terms for non-executive directors; a public justification to combine the chairman and chief executive officer positions; as well as the disclosure of details of the remuneration of executive and non-executive directors.
"Non-executive directors should be appointed for specific terms and reappointment should not be automatic; all directors should be subject to shareholder election following their appointments and re-elections thereafter. Appointment to the board should follow formal and transparent procedures; the nomination committee should make recommendations on all new board appointments. Directors should submit themselves for re-election at regular intervals of no more than three years," says the two-page draft code produced by the Council.
This code, once finalised, would apply to public companies trading in the securities exchange.
The draft says the ideal situation would be for companies to have a strong and independent non-executive element on its board as well as a senior independent director other than the chairman to whom concerns can be brought. These persons should be identified in the annual report.
The Council encourages the separation of the functions of the chairman and CEO and says any decision to combine these "must be publicly justified". It is also suggested that the board should have a balance of executive and non-executive directors, including independent non-executives, so that no individual or group can dominate the decision making process.
The code says that an ideal situation to be worked towards would be for a majority of non-executive directors to be independent of management and be free from any business or relationship that could interfere with their independence of judgement.
The Council suggests three mandatory committees on company's boards; audit, remuneration and governance, with the audit committee comprising at least three non-executive directors, a majority of whom should be independent. The remuneration committee should be made up exclusively of non-executive directors. The latter is to make recommendations on the company's framework of executive remuneration and both committees are to operate independently from managerial interference and from any intrusive business relationship.
The Council says companies' boards should also establish procedures for assessing the effectiveness of the boards as a whole, along with contributions of individual directors.
It says the remuneration of executive directors should be sufficient and be linked to performance while those for non-executive directors should reflect experience and the responsibilities undertaken. The council recommends that the remuneration committee disclose to the board and to shareholders the remuneration of directors so that this can be voted on.
"Corporations should be cautious about including extended notice period and golden parachute arrangements with executives," the Council says.
As to the role of shareholders, the council reminds that they have a responsibility to make considered use of their votes and companies should work to have shareholders take an active role at annual meetings. It also says that the separate chairmen of the board committees should appear at annual meetings to answer shareholder queries.