Download Corporate Governance Rating System[1] PDF

TitleCorporate Governance Rating System[1]
TagsAudit Board Of Directors Corporate Governance Governance Audit Committee
File Size670.6 KB
Total Pages30
Document Text Contents
Page 1

a b

Page 2

c i

The Association of Development Financing Institutions in Asia & the
Pacific (ADFIAP) is the focal point of all development banks and other financial
institutions engaged in the financing of development in the Asia-Pacific region. Its
mission is to advance sustainable development through its members. Founded in
1976, ADFIAP has currently 58 member-institutions in 30 countries. The Asian
Development Bank is a Special Member of the Association. ADFIAP is also a founding
member of the World Federation of Development Financing Institutions composed
of regional associations in Africa, Asia-Pacific, Latin America and the Middle East.
ADFIAP is an NGO in consultative status with the United Nations' Economic and
Social Council. The permanent Secretariat of ADFIAP is based in Makati City,
Metro Manila, Philippines.

For more information, contact:

ADFIAP
2F Skyland Plaza, Sen. Puyat Ave.
Makati City, M.M. 1200
Philippines

Tel. No. (632)8449090 / 8442424
Fax. No. (632) 8176498
Email: [email protected]
Web: http://www.adfiap.org

To learn more about ADFIAP-CIPE Corporate Governance for DFIs Project,
please write/call ADFIAP at the above address and contact nos.

The Center for International Private Enterprise (CIPE) is an independent,
non-profit affiliate of the U.S. Chamber of Commerce. As one of the four core
institutes of the National Endowment for Democracy, CIPE promotes democratic
and market-oriented economic reforms by working directly with the private sector
in developing countries. Since 1983, CIPE has supported more than 800 local
initiatives in 95 developing countries to organize business associations and involve
businessmen and women in policy advocacy, institutional reform, and responsible
governance. By supporting entrepreneurship and business development, CIPE helps
build the foundation for accountable, democratic institutions and economic growth.
CIPE administers a worldwide grants program, provides specialized training for
entrepreneurs, conducts an award-winning communications strategy, and furnishes
technical assistance through field offices overseas.

For more information, contact:

Center for International Private Enterprise
1155 Fifteenth Street NW • Suite 700
Washington, DC 20005 USA

ph: (202) 721-9200 • fax: (202) 721-9250
web: www.cipe.org • e-mail: [email protected]

This booklet is meant as a learning tool for financial institutions on corporate governance issues. No part
of this publication may be reproduced in any form or by any means without written permission from the
publisher. For comments and/or requests for copies of this booklet, please contact ADFIAP at the above-stated
address and contact details.

Corporate
Governance
Rating System
FOR DEVELOPMENT BANKS &
OTHER FINANCIAL INSTITUTIONS

Page 15

22 23

• Presented to show comparisons?

Provision of comparative facts and figures determine the FI’s current situation vis-a-vis
past performance and future trends.

1 2 3 4 5 6 7
Very low Very High

• Contains important non-financial information to explain performance?

Non-financial information, like changes in the industry, competition, technology and the
entry or exit of players, is required to understand the financial institution’s performance.

1 2 3 4 5 6 7
Very low Very High

2.1 Does the Chairman exercise leadership by setting the agenda for the Board
meeting?

The agenda for the Board meeting may be prepared by the Board Secretary for the Chairman’s
revision and approval. Answer “yes” if in practice the agenda is set in advance and the
Chairman approves the final draft of the Board agenda.

Yes No

2.2 Does the Chairman encourage and give opportunity for directors to

participate actively in board deliberations?

The Chairman’s style may range from going over the entire agenda without encouraging
comments from other directors (“not involved”) or taking time to ask comments of each director
and extensively discussing their comments (“highly involved”).

1 2 3 4 5 6 7
No opportunity Ample opportunity

2.3 Is the Chairman of the Board also the President and CEO of the FI?

If the Chairman of the Board is also the final executive decision maker, answer “yes”. Check
if this position of Chairman and CEO is mandated in the charter of the financial institution,
in which case, answer “yes”.

Yes No


Is the appointment of the Chairman and CEO mandated in the FI’s charter

or Articles of Incorporation?

Yes No

2.4 Is the Board largely separate from management, i.e., management reports to
the Board and the Board is not involved in decision-making except for matters
reserved for it (e.g., large loans and related party transactions)

Separation of the Board from management is tested by determining whether management can
make decisions over matters entrusted to it without undue intervention by the Board. If the
Board is known to intervene frequently and over matters already assigned to management,
answer “no”. Indicate the degree of involvement by the Board in the next question. If you
answered “yes” to the previous question, you are expected to answer between “1” and “3”.
If you answered “no”, you are expected to choose between “5” and “7” to justify your earlier
claim of high degree of involvement by the Board in management matters.

Yes No

To what degree is the Board involved in management of the FI?

1 2 3 4 5 6 7
Not involved Highly involved

2.5 Do directors get appointed under a process (“Fit and Proper Test”) that includes
a review by authorities of a nominee’s experience, character, motivation
and skills?

Is there an explicit and formal checklist and appraisal of candidates to the Board? The
checklist should specify the preferred background or qualifications of the Board. Many Central
Banks require a review based on a “Fit and Proper Test”. Is there one for your financial
institution for the appointment of directors?

Yes No

2.6 Is there a separate and more rigorous process used for selecting the
Chairman?

Was the appointment of the Chairman based on a nomination and qualification process
followed by the appointing authority in the government?

Yes No

Page 16

24 25

2.7 Rate the diversity (different experience and disciplines) and skill levels of
your board:

Diversity means different background of directors: for part (a) as to education, previous
and current corporate involvement, interest and personality; and for part (b), as to expertise
and skills.

a. Diversity

1 2 3 4 5 6 7
Similar backgrounds Very different backgrounds

b. Expertise and skills

1 2 3 4 5 6 7
Broad exposure and experience Highly skilled experts

2.8 How many directors (members) are there in the Board?

Specify the number of directors in the Board of your financial institution. Give a breakdown
for independent directors, non-executive directors and executive directors in the present Board.
Independent directors are those without executive or any other position or contractual relationship
with the financial institutions Executive directors are those currently holding executive positions
with the financial institution.

Of this total number of directors, how many are:

a. independent directors

b. outside or non-executive directors

c. executive directors

2.9 Do the directors receive reasonable compensation?

The reasonableness of the compensation of directors is difficult to appraise because they vary
across financial institutions. Reference can be to compensation at other financial institutions.
Another is the Chairman should get paid as much as a CEO on a time spent basis (i.e.,
about equal in hourly rate). Still another yardstick for reasonable directors pay is an amount,
like $100 per Board meeting or some other amount deemed reasonable in the country as
compensation for time spent by a senior professional.

1 2 3 4 5 6 7
Too little Reasonable Too much

2.10 Does the board conduct regular meetings of at least quarterly and at most
monthly?

Answer “yes” if the Board meets regularly (on fixed schedule) between monthly and
quarterly periods. If some other schedule like the legal minimum of annual or on “call”
basis, answer “no”.

Yes No

2.11 Are the minutes of the meeting duly taken and shows details about the
discussions, particularly the positions taken by directors on key issues?

Two requirements for a “yes” answer to the questions are whether somebody takes minutes
of the Board, usually the Board secretary, and whether those minutes are detailed enough
to know the opinions expressed by directors on specific issues discussed and decided upon
by the Board. If minutes are taken but details are not shown, answer “no”.

Yes No

2.12 How many of the board directors have attendance of meetings (include electronic
conference meetings if allowed by authorities):

For example, if the Board meetings are monthly, count directors attended:

2.12.1 at least 75% of board meetings last year?
9 or more meetings last year

2.12.2 Less than 25% of board meetings last year?
3 or less meetings last year

2.13 How many of your directors are concurrent directors:

Count the number of directors with directorships according to the 3 categories given.
Directorships at institutions are counted as 1 regardless of size but do not include civic
organizations, country clubs and the like. The guideline is that institutions should have
important issues for the Board and that there is a “bottom line” set of objectives that a
Board works to achieve.

2.13.1 in more than 10 institutions?

2.13.2 in 5 to 10 institutions?

2.13.3 in less than 5 institutions?

Page 29

50 51


Point System for Development Finance Institutions

Name of DFI: Date of Evaluation:


Item Corporate Governance Area Max Score Raw Score Total Score

Comments
for Parts 1- 4 on Areas for Improvement

Part 1
Stakeholders and

25%
Beneficiary Rights

Part 2 The Board and Its Governance Role 25%

A. Chairman 10%

B. Board Members 10%

Part 3. Commitment to CG 20%

Part 4 External Auditing 15%

Part 5 Disclosure 15%

Total Score

Guidelines on scoring:



ANNEX I
Point System for Banks and other Financial Institutions

Name of Bank or Financial Institution:



Item Corporate Governance Area Maximum Score Raw Score Total Score for Comments on Areas for Improvement
Parts1-4

Part 1 Shareholder Rights 25%

Part 2 The Board and Its Governance Role 25%

Part 3 Commitment to CG 20%

Part 4 Auditing 12%

Part 5 Disclosure 15%

Total Score

Guidelines on scoring:

Page 30

52 53

STATEMENT OF MISSION

To advance sustainable development by strengthening

the development finance function and institutions, enhancing capacity

of members, and advocating development

finance innovations

Similer Documents