King 3 Corporate Governance Code

[Total of 9 areas and 75 principles (A few are duplicated for grouping reasons.)]

According to Botswana Accountancy Oversight Authority (BAOA) guidelines, listed and public interest entities should follow corporate governance practices that should conform to King 3 Code as a minimum.  Please note that BAOA is in the process of establishing Corporate Governance Code for Botswana.

Area 1: Ethical foundation

Principle 1.1: The board should provide effective leadership based on an ethical foundation

Principle 1.2:  The board should ensure that the company is and is seen to be a responsible corporate citizen

Principle 1.3:  The board should ensure that the company’s ethics are managed effectively

 

Area 2: Boards and directors

Principle 2.1: The board should act as the focal point for and custodian of corporate governance

Principle 2.2: The board should appreciate that strategy, risk, performance and sustainability are inseparable

Principle 2.3:  The board should provide effective leadership based on an ethical foundation

Principle 2.4:  The board should ensure that the company is and is seen to be a responsible corporate citizen.

Principle 2.5:  The board should ensure that the company’s ethics are managed effectively

Principle 2.6:  The board should ensure that the company has an effective and independent audit committee

Principle 2.7:  The board should be responsible for the governance of risk

Principle 2.8:  The board should be responsible for information technology (IT) governance

Principle 2.9:  The board should ensure that the company complies with applicable laws and considers adherence to non-binding rules, codes, and standards

Principle 2.10: The board should ensure that there is an effective risk-based internal audit

Principle 2.11: The board should appreciate that stakeholders’ perceptions affect the company’s reputation

Principle 2.12: The board should ensure the integrity of the company’s integrated report

Principle 2.13: The board should report on the effectiveness of the company’s system of internal controls

Principle 2.14: The board and its directors should act in the best interests of the company

Principle 2.15:  The board should consider business rescue proceedings or other turnaround mechanisms as soon as the company is financially distressed as defined in the Act

Principle 2.16:  The board should elect a chairman of the board who is an independent non-executive director. The CEO of the company should not also fulfill the role of chairman of the board

Principle 2.17:  The board should appoint the chief executive officer and establish a framework for the delegation of authority

Principle 2.18: The board should comprise a balance of power, with a majority of non-executive directors. The majority of non-executive directors should be independent

Principle 2.19: Directors should be appointed through a formal process

Principle 2.20:  The induction of and ongoing training and development of directors should be conducted through formal processes

Principle 2.21: The board should be assisted by a competent, suitably qualified and experienced company secretary

Principle 2.22: The evaluation of the board, its committees and the individual directors should be performed every year

Principle 2.23: The board should delegate certain functions to well-structured committees but without abdicating its own responsibilities

Principle 2.24: A governance framework should be agreed between the group and its subsidiary boards

Principle 2.25: Companies should remunerate directors and executives fairly and responsibly

Principle 2.26: Companies should disclose the remuneration of each individual director and prescribed officer

Principle 2.27: Shareholders should approve the company’s remuneration policy

 

Area3:  Audit committees

Principle 3.1:  The board should ensure that the company has an effective and independent audit committee

Principle 3.2:  Audit committee members should be suitably skilled and experienced independent non-executive directors

Principle 3.3: The audit committee should be chaired by an independent non-executive director

Principle 3.4: The audit committee should oversee integrated reporting

Principle 3.5:  The audit committee should ensure that a combined assurance model is applied to provide a coordinated approach to all assurance activities

Principle 3.6: The audit committee should satisfy itself of the expertise, resources, and experience of the company’s finance function

Principle 3.7: The audit committee should be responsible for overseeing of internal audit

Principle 3.8:  The audit committee should be an integral component of the risk management process

Principle 3.9:  The audit committee is responsible for recommending the appointment of the external auditor and overseeing the external audit process

Principle 3.10: The audit committee should report to the board and shareholders on how it has discharged its duties

 

Area 4: The governance of risk

Principle 4.1: The board should be responsible for the governance of risk

Principle 4.2: The board should determine the levels of risk tolerance

Principle 4.3:  The risk committee or audit committee should assist the board in carrying out its risk responsibilities

Principle 4.4:  The board should delegate to management the responsibility to design, implement and monitor the risk management plan.

Principle 4.5: The board should ensure that risk assessments are performed on a continual basis

Principle 4.6:  The board should ensure that frameworks and methodologies are implemented to increase the probability of anticipating unpredictable risks

Principle 4.7:  The board should ensure that management considers and implements appropriate risk responses

Principle 4.8: The board should ensure continual risk monitoring by management

Principle 4.9:  The board should receive assurance regarding the effectiveness of the risk management process

Principle 4.10: The board should ensure that there are processes in place enabling complete, timely, relevant, accurate and accessible risk disclosure to stakeholders

 

Area 5:  The governance of information technology (IT)

Principle 5.1: The board should be responsible for information technology (IT) governance. 

Principle 5.2:  IT should be aligned with the performance and sustainability objectives of the company.

Principle 5.3:  The board should delegate to management the responsibility for the implementation of an IT governance framework

Principle 5.4: The board should monitor and evaluate significant IT investments and expenditure

Principle 5.5: IT should form an integral part of the company’s risk management

Principle 5.6: The board should ensure that information assets are managed effectively

Principle 5.7:   A risk committee and audit committee should assist the board in carrying out its IT responsibilities

 

Area 6: Compliance with laws, rules, codes and standards

Principle 6.1:  The board should ensure that the company complies with applicable laws and considers adherence to non-binding rules, codes and standards

Principle 6.2:  The board and each individual director should have a working understanding of the effect of the applicable laws, rules, codes and standards on the company and its business

Principle 6.3:  Compliance risk should form an integral part of the company’s risk management process

Principle 6.4:  The board should delegate to management the implementation of an effective compliance framework and processes

 

Area 7: Internal audit

Principle 7.1: The board should ensure that there is an effective risk based internal audit

Principle 7.2: Internal audit should follow a risk based approach to its plan

Principle 7.3:  Internal audit should provide a written assessment of the effectiveness of the company’s system of internal control and risk management

Principle 7.4: The audit committee should be responsible for overseeing internal audit

Principle 7.5: Internal audit should be strategically positioned to achieve its objectives

 

Area 8: Governing stakeholder relationships

Principle 8.1:  The board should appreciate that stakeholders’ perceptions affect a company’s reputation

Principle 8.2:  The board should delegate to management to proactively deal with stakeholder relationships

Principle 8.3:  The board should strive to achieve the appropriate balance between its various stakeholder groupings, in the best interests of the company

Principle 8.4: Companies should ensure the equitable treatment of shareholders

Principle 8.5:  Transparent and effective communication with stakeholders is essential for building and maintaining their trust and confidence

Principle 8.6:  The board should ensure disputes are resolved as effectively, efficiently, and expeditiously as possible

 

Area 9: Integrated reporting and disclosure

Principle 9.1: The board should ensure the integrity of the company’s integrated report

Principle 9.2:  Sustainability reporting and disclosure should be integrated with the company’s financial reporting

Principle 9.3: Sustainability reporting and disclosure should be independently assured.