CORPORATE GOVERNANCE —  Consensus-Oriented — Mediates  Promote Accountability — Hold

EXAM NOTES differing interests to reach broad board/management accountable;

consensus on group best interest checks and balances
 Equity and Inclusiveness — All  Enhance Transparency —
CHAPTER 1: INTRODUCTION TO men and women have Timely, accurate disclosure of
CORPORATE GOVERNANCE opportunities to improve/maintain financial/operational info
well-being  Support Ethical Decision-
 Effectiveness and Efficiency — Making — Culture of integrity;
Definition & Core Concepts Processes produce results that prevent corruption/fraud
meet needs while making best use  Improve Operational Efficiency
 Governance — Process of of resources — Clear governance structure;
decision-making and  Accountability — Liability to enhance risk management
implementation through exercise of explain results of decisions taken in  Foster Long-Term
power/authority by leaders interest of others Sustainability — Align with ESG
 Corporate Governance — principles; responsible citizenship
System of rules, practices, and
processes by which a company is Purpose of Corporate
directed and controlled; balancing Governance 4 Additional Objectives
interests of all stakeholders
 Facilitate effective, entrepreneurial,  Fair and equitable treatment of
and prudent management all shareholders
8 Characteristics of Good  Self-assessment — Assess
Governance  Deliver long-term success of the behavior before regulatory scrutiny
company  Increase shareholders' wealth
 Enhance shareholders' value — Protect long-term interests
 Participation — Both men and
and protect interests of other Transparency and full
women have voice in decision- 
stakeholders disclosure — Includes strategic
making (direct or through
institutions) AND operational risk disclosure
 Rule of Law — Fair legal
6 Key Objectives
framework, enforced impartially
 Transparency — Free flow of 3 Basic Principles of Effective
information; processes accessible  Protect Shareholders' Interests Corporate Governance
to those concerned — Ensure voice for shareholders
 Responsiveness — Institutions (especially minority), fair returns,
serve stakeholder needs within equitable treatment
reasonable time
 Transparency & Full Disclosure 10. Recognize the legitimate  Specifics: Elect board, approve
— Is the Board telling us what is interests of stakeholders buying/selling stock, review
going on? Does it safeguard management compensation
integrity in financial reporting? reports
 Accountability — Is the Board BOARD OF DIRECTORS
taking responsibility? Does it clarify
 Broad Role: Major representative of
its role vs. management?
stockholders; ensure organization
 Corporate Control — Is the Board
runs according to charter with
doing the right thing? Does it
proper accountability
create environment to take risk?
Build long-term sustainable CHAPTER 2: RESPONSIBILITIES
 Overall Operations:
growth? & ACCOUNTABILITIES
o Establish vision, mission, values,
ethical standards
10 Best Practice Key Relationship Chain
o Delegate appropriate authority to
Recommendations
management
 Shareholders/Owners → Board
1. Lay solid foundations for of Directors → Executive o Demonstrate leadership
management and oversight Management → Operational
Management o CEO appointment, succession,
2. Structure the board to be effective  Shareholders have performance, remuneration,
and add value accountabilities dismissal
 Board delegates responsibilities
3. Instil a culture of acting lawfully, o Oversee management team
 Internal Auditors, External Auditors,
ethically and responsibly employment (remuneration,
Regulators, Society =
performance, succession)
4. Safeguard the integrity of Stakeholders
corporate reports o Recommend auditors and new
directors to shareholders
5. Make timely and balanced Parties & Their Roles
disclosure o Ensure effective communication
SHAREHOLDERS/OWNERS with shareholders/stakeholders
6. Respect the right of the
shareholders  Broad Role: Provide effective o Crisis management
7. Recognize and manage risk oversight through election of board o Appointment of CFO and corporate
members, approval of major secretary
8. Encourage enhanced performance initiatives, annual reports on  Performance:
management compensation
9. Remunerate fairly and responsibly o Ensure long-term viability; enhance
financial position
o Formulate and oversee corporate NON-EXECUTIVE/INDEPENDENT o Run business (human, physical,
strategy DIRECTORS financial resources)
o Approve plan, budget, corporate  Broad Role: Same as entire board o Day-to-day legal/regulatory
policies of directors compliance and compliance
framework
o Agree key performance indicators  Specifics:
(KPIs) o Develop, implement, manage risk
o Understand organization, business,
management and internal control
o Monitor/assess organization, board, operating environment, financial
frameworks
management, major projects position
o Develop, implement, update
o Oversee risk management o Apply expertise and skills in
policies and procedures
framework; monitor business risks organization's best interests
o Alert to industry and operating
o Monitor industry and operating o Assist management to keep
environment trends
environment developments performance objectives top priority
o Act as conduit between board and
o Oversight of organization including o Role is NOT auditor, NOT
organization
control and accountability systems management team member
o Provide information to the board
o Approve/monitor major capital o Respect collective, cabinet nature
expenditure, capital management, of board decisions o Develop financial and other reports
acquisitions/divestitures meeting public, stakeholder,
o Prepare for and attend board
 Compliance/Legal regulatory requirements
meetings
Conformance: AUDIT COMMITTEES
o Seek information timely to
o Require and monitor  Broad Role: Oversight of
contribute to discussion; alert
legal/regulatory compliance internal/external audit function and
chairman if further info needed
(accounting standards, unfair preparation of annual financial
MANAGEMENT
trading, occupational health/safety, statements/public reports on
environmental standards)  Broad Role: Operations and internal control
accountability; manage effectively;
o Approve annual financial reports,  Specifics:
provide accurate/timely reports to
annual reports, other
shareholders/stakeholders o Select external audit firm
public/sensitive documents
 Specifics: o Approve any non-audit work by
o Ensure effective internal controls
audit firm
exist and operate o Recommend strategic direction;
translate strategic plan into
o Understand and protect business operations
organization's financial position
o Select/approve appointment of o Specify independence standards  NOT mandatory compliance —
Chief Audit Executive (Internal required of auditors reporting on companies don't HAVE to comply
Auditor) public financial statements  BUT must disclose in annual
corporate governance reports
o Review/approve scope and budget o Identify corporate frauds, whether they comply
of internal audit function investigate causes, suggest  Must identify areas of non-
remedial actions compliance and explain reasons
o Discuss audit findings with EXTERNAL AUDITORS
internal/external auditors; advise  Combines voluntary compliance
board and management on specific  Broad Role: Audit financial with mandatory disclosure
actions statements to ensure free of
 Meet at least QUARTERLY to material misstatements (including
discuss audit, compliance, and fraud) 3 Aspects of the Code
financial issues
 Specifics: Audit public/nonpublic PRINCIPLES — High-level
REGULATORS 
company financial statements; statements of good practice;
 Broad Role: Oversight and other services (tax/consulting) applicable to ALL companies
standard-setting INTERNAL AUDITORS  RECOMMENDATIONS — Objective
 Board of Accountancy:  Broad Role: Audit compliance with criteria identifying specific features
policies/laws; evaluate efficiency of of good practice; alternatives
o Conduct CPA Licensure Board operations; test controls justified if good governance
Examinations achieved by other means
 Specifics: Report to management  EXPLANATIONS — Additional
o Approve accounting principles and audit committees; evaluate information on recommended best
o Approve auditing standards internal controls practice

o Interpret previously issued

standards; implement quality Principle of Proportionality
control processes
o Educate members on audit and  NOT "one size fits all"
accounting requirements  Larger companies/financial
 Securities and Exchange institutions expected to follow most
Commission: provisions
CHAPTER 3 & 4: SEC CODE OF
CORPORATE GOVERNANCE  Smaller companies may decide
o Review filings with the SEC
costs outweigh benefits or are less
o Interact with Financial Reporting relevant
Standards Council in setting Key Framework: "Comply or
accounting standards Explain" Approach
 Allows boards flexibility in  Related Party — Subsidiaries,  Majority of non-executive
establishing governance affiliates, any party company directors with necessary
arrangements controls or that controls company; qualifications for objective,
directors; officers; shareholders independent judgment
and related interests (DOSRI); close Recommendation 1.2
Key Definitions family members; other
 Board Charter and Manual on
persons/entities with potential
Corporate Governance must
 Corporate Governance — conflict
include training policy
System of stewardship and control  Related Party Transactions —
 Orientation for first-time directors
to guide organizations in fulfilling Transfer of resources, services or
long-term economic, moral, legal obligations between reporting  Annual continuing training for ALL
and social obligations toward entity and related party, regardless directors
stakeholders of price charged Recommendation 1.3
 Board of Directors — Governing  Stakeholders — Any individual,
body elected by stockholders that organization or society that can  Board must have diversity policy
exercises corporate powers, affect and/or be affected by Recommendation 1.4
conducts all business, controls company's strategies, policies,  Corporate Secretary — separate
properties decisions, operations from Compliance Officer
 Management — Group of  NOT a board member
executives given authority by
Board to implement policies  Annual corporate governance
 Independent Director — training
Independent of management and Recommendation 1.5
controlling shareholder; free from  Compliance Officer — rank of
any relationship that could Senior VP or equivalent
materially interfere with  Adequate stature/authority
PRINCIPLE 1: Establishing a
independent judgment
Competent Board
 Executive Director — Director  NOT board member
with executive responsibility for
day-to-day operations  "Company should be headed by  Annual corporate governance
 Non-Executive Director — competent, working board to foster training
Director with NO executive long-term success,
responsibility; doesn't perform competitiveness, profitability
operational work consistent with corporate
 Conglomerate — Group of objectives and long-term best
corporations with diversified interests of shareholders and
business activities controlled by stakeholders"
parent entity Recommendation 1.1
 PRINCIPLE 2: Clear Roles &  No director participates in own  Insolvency
Responsibilities remuneration discussions
Recommendation 2.6  Foreign convictions
 "Fiduciary roles, responsibilities  Formal, transparent  Imprisonment or Corporation Code
and accountabilities should be nomination and election policy violation
clearly made known to all directors, in Manual
shareholders, and stakeholders"  Other grounds designated by SEC
 Includes minority shareholder Temporary Disqualification
Two Key Elements of Fiduciary nominations
Duty: Grounds:
 Assessment of board processes  Excessive absence from Board
 Duty of Care
 Duty of Loyalty  Quality of directors aligned with meetings
Recommendation 2.1 strategic direction  Dismissal or termination for cause
Director Qualifications (4
 Board members act on fully Excessive equity ownership by
Requirements): 
informed basis, in good faith, independent directors
with due diligence and care, in 1. Knowledge, skills, experience,
best interest of company and ALL independence of mind (especially  Pending judgments or orders
shareholders non-executive directors) Recommendation 2.7
Recommendation 2.2
2. Record of integrity and good repute  Group-wide RPT policy and
 Board oversees and approves system
business objectives and strategy; 3. Sufficient time to carry out  Appropriate review/approval of
monitors implementation responsibilities material/significant RPTs
Recommendation 2.3 4. Ability to promote smooth  Fairness and transparency
 Competent, qualified Chairperson interaction between board RPT Policy Content (8
Recommendation 2.4 members Elements):
Permanent Disqualification
 Effective succession planning for Grounds: 1. Definition of related parties
directors, key officers,
management  Securities crimes 2. Coverage of RPT policy
 Includes retirement age policy  Financial industry conduct crimes 3. Guidelines for arm's-length terms
Recommendation 2.5
 Fiduciary relationship crimes 4. Identification and
 Remuneration aligned with prevention/management of
long-term interests  Crimes involving moral turpitude or conflicts of interest
 Policy on remuneration- fraud
performance relationship 5. Adoption of materiality thresholds
 Willful violation of laws
6. Internal limits for individual and  Publicly available; posted on o Coordinate with external auditors
aggregate exposures website
o Evaluate non-audit services
7. Whistle-blowing mechanisms
o Review/approve financial
8. Restitution of losses and remedies statements
for abusive RPTs
Recommendation 2.8 o Review auditor's management
letter
 Board approves selection and
assesses performance of o Compliance oversight
Management (CEO) and control PRINCIPLE 3: Establishing
o External auditor oversight
functions (CRO, CCO, CAE) Board Committees
Recommendation 2.9 o Committee substitution
 "Board committees should be set CORPORATE GOVERNANCE
 Effective performance
up to support effective COMMITTEE
management framework for
performance of Board's functions,
management, CEO, personnel at  At least 3 members, ALL
particularly audit, risk
par with Board/Senior Management independent directors (including
management, RPTs, nomination,
standards Chairman)
remuneration"
Recommendation 2.10  Duties:
AUDIT COMMITTEE
 Appropriate internal control o Corporate Governance framework
 At least 3 qualified non-
system implementation/review
executive directors
 Mechanism for monitoring conflicts
 Majority independent (including o Performance evaluation
of interest
chair)
 Approve Internal Audit Charter  Must have accounting, auditing, o Action planning
Recommendation 2.11 finance expertise o Development/training
 Sound ERM framework to  Chair cannot also chair Board recommendations
identify, monitor, assess, manage or other committees o Policy adoption
key business risks  Duties:
 Identifies unit/business line and o Director nomination and
o Approve Internal Audit Charter
enterprise-level exposures election
o Monitor and evaluate o Remuneration policy
 Effectiveness of risk management
BOARD RISK OVERSIGHT
strategies o Oversee Internal Audit Department COMMITTEE (BROC)
Recommendation 2.12
o Reporting line  At least 3 independent directors
 Board Charter formalizing roles,
(excluding Board Chair)
responsibilities, accountabilities o Monitor management response
 1 member with risk PRINCIPLE 5: Reinforcing Board
management expertise Independence
 Duties:
o Develop formal ERM plan  "Board should endeavor to exercise
objective and independent
o Oversee ERM implementation PRINCIPLE 4: Fostering judgment on all corporate affairs"
Commitment Recommendation 5.1
o Evaluate ERM plan
 At least 3 independent
o Annual risk review/advice  "Directors should devote time and directors, or number constituting
attention necessary to properly at least 1/3 of board, whichever
o Risk assessment perform duties, including sufficient is higher
o Oversee risk management time to be familiar with Recommendation 5.2
activities corporation's business"
Recommendation 4.1  Independent directors possess
o Regular reporting to Board necessary qualifications and
 Directors attend and actively none of the disqualifications
RPT COMMITTEE
participate in all board meetings, 11 Ideal Qualifications for
 At least 3 non-executive committees, shareholders Independent Director:
directors, 2 independent meetings (in person or tele/video)
(including Chairman)  Exceptions: illness, death in 1. Not/has not been senior officer or
 Subject to size, risk profile, immediate family, serious employee of covered company
complexity accidents (unless change in controlling
Recommendation 4.2 ownership)
 Duties:
 Non-executive directors serve as 2. Not/has not been in 3 years
o Evaluate all material RPTs directors to maximum of 5 preceding election: director of
o Ongoing relationship evaluation publicly listed companies company; director/officer/employee
Recommendation 4.3 of
o Disclosure to authorities subsidiaries/associates/affiliates/rel
 Director must notify Board before
ated companies;
o Regular reporting to Board accepting directorship in another
director/officer/employee of
company
o Independent review/audit substantial shareholders and
related companies
o System oversight
3. Not appointed as Chairman
"Emeritus," "Ex-Officio"
Directors/Officers, Advisory Board
member within 3 years preceding
election
4. Not owner of more than 2% of 11. Not employed as executive  Manage resources prudently;
outstanding shares of officer of another company where ensure proper balance
company/subsidiaries/affiliates/rela any of company's executives serve
ted companies as directors  Provide Board with timely
5. Not relative of director, officer, or  Related companies =
information; interface between
substantial shareholder of holding/parent company + Board and employees
company/related subsidiaries + subsidiaries of  Build corporate culture; motivate
companies/substantial holding/parent company employees
shareholders (spouse, parent, Recommendation 5.3
child, brother, sister, spouse of  Serve as link between internal
 Independent directors serve operations and external
child/brother/sister)
maximum cumulative term of 9 stakeholders
6. Not acting as nominee or years Recommendation 5.5
representative of any director of  After which perpetually barred
company/related companies from re-election as independent in  If Chairman is not independent
same company (including if Chairman = CEO),
7. Not securities broker-dealer of  May continue as non- designate Lead Director among
listed companies and registered independent director independent directors
issuers Recommendation 5.4 Lead Director Functions:
8. Not retained as professional  Chairman and CEO must be  Intermediary between Chairman
adviser, auditor, consultant, agent, separate individuals with clearly and other directors when
counsel within 3 years preceding defined responsibilities necessary
election CEO Roles & Responsibilities:
 Convene and chair meetings of
9. Does not engage/has not engaged  Determine strategic direction; non-executive directors
in any transaction with formulate/implement strategic plan
company/related  Contribute to performance
companies/substantial  Communicate/implement vision, evaluation of Chairman
shareholders (other than arm's mission, values, overall strategy Recommendation 5.6
length transactions that couldn't Director with material interest in
 Oversee operations; manage 
materially interfere with transaction must abstain from
human and financial resources per
independent judgment) deliberations
strategic plan
10. Not affiliated with non-profit Recommendation 5.7
 Good working knowledge of
organization receiving significant  NEDs have separate periodic
industry and market; keep up-to-
funding from company/related meetings with external auditor
date
companies/substantial and heads of internal audit,
shareholders  Direct, evaluate, guide key officers compliance, risk
 Without executive directors Table
present Item Number
 Chaired by lead independent
Item Number
director
BROC At least 3
members independent
Independent 3 or 1/3 of
directors board,
minimum whichever is RPT Committee At least 3 non-
higher members executive, 2
independent
Maximum PLCs 5
PRINCIPLE 6: Assessing Board for non- Board self- Every 3 years
Performance executive assessment
directors external
 "Best measure of Board's facilitator
effectiveness is through
Independent 9 years
assessment process"
director Vote results Next working
Recommendation 6.1
maximum publication day
 Annual self-assessment of Board cumulative term
performance, including Chairman,
individual members, committees Minutes on Within 5
Maximum share 2% website business days
 Every 3 years supported by
ownership for
external facilitator
independent
Recommendation 6.2 Audit At least
director
 System with minimum criteria Committee quarterly
and process to determine meetings
performance of Board, individual Audit Committee At least 3
directors, committees members
Independent 3 years
 Feedback mechanism from director
shareholders Corporate At least 3 (ALL "cooling off"
Governance independent) for prior roles
Committee
members

QUICK NUMBERS TO MEMORIZE