• Principle 2 — Division of responsibilities

    Rule 9.2.4

    "The Board must ensure that there is a clear division between the Board's responsibility for setting the strategic aims and overseeing the Reporting Entity and the Senior Management's responsibility for managing the Reporting Entity's business in accordance with the strategic aims and risk parameters set by the Board."

    • Board and Senior Management

      14. The division of responsibilities between the Board and the Senior Management of the Reporting Entity should be clearly established, set out in writing, and agreed to by the Board. In assigning duties, the Board should ensure that no one individual has unfettered powers in making decisions. It should also ensure that there is a clear segregation of the functions of:
      a. the oversight of the management by the Board; and
      b. the management of the Reporting Entity's business by the Senior Management in accordance with the strategic aims and risk parameters set by the Board.
      15. Board members may include individuals undertaking Senior Management functions. For example, the Chief Executive of a Reporting Entity may also be a Board member. Where this is the case, the Board should ensure that when assessing the performance of the Senior Management, the independence and objectivity of that process is achieved through appropriate mechanisms, such as the assignment of such a task to a non-executive Director of the Board or a committee comprising a majority of non-executive Directors.

    • Chairman and Chief Executive

      16. In order to ensure that the Board's function of providing effective oversight of the management of the Reporting Entity is not compromised, it is important that the role of the chairman of the Board and the role of the Chief Executive of the Reporting Entity should not be held by the same individual.
      17. However, if the Board decides that the Chief Executive should also hold the position of the chairman of the Board, there should be effective measures to ensure that the Board is able to properly discharge its function of providing effective oversight of the management of the business of the Reporting Entity by its Senior Management. For example, the performance assessment of the Chief Executive and other members of the Senior Management should be undertaken by a non-executive Director of the Board or a committee comprising a majority of non-executive Directors who report to the Board directly on their assessment, and also, prior approval by Shareholders of the appointment of the Chief Executive as chairman of the Board.
      18. Except where the positions of the chairman of the board and the Chief Executive are held by the same person, the division of responsibilities between the chairman and Chief Executive should be clearly established, set out in writing and agreed to by the Board.
      19. The chairman should be responsible for providing leadership of the Board, ensuring its effectiveness in all aspects of the Board's role and setting its agenda.
      20. Except where the positions of the chairman of the Board and the Chief Executive are held by the same individual, the chairman of the Board should meet the independence criteria set out in paragraph 31.
      21. The annual report of the Reporting Entity should:
      a. identify the chairman, the deputy chairman (where there is one), the Directors and the Chief Executive; and
      b. include a high level statement of which types of decisions are to be taken by the Board and which are to be delegated to the Senior Management.