Weakness |
Recommendation |
Wilson Galloon is now the chair after having been the chief executive until last year.
The chair must be an independent non‐executive director and hence cannot have previously been the chief executive of the same company. The roles of chair and chief executive are both very important and carry significant responsibilities. Too much power resides in the hands of one individual. |
Wilson Galloon should return to his role as chief executive as this will fill the current vacancy and an independent non‐executive director should be recruited to fill the role of chair. Open advertising and/or an external search consultancy should be used for the appointment of the chair. |
The board comprises five executives and only three non‐executive directors.
There should be an appropriate balance of executives and non‐executives, to ensure that the board makes the correct objective decisions, which are in the best interest of the stakeholders of the company.
The executives can dominate the board’s decision making. |
At least half the board, excluding the chair should be independent NEDs. Hence the board of Trumpet should consider recruiting and appointing two additional independent non-executive directors. |
Wilson Galloon is considering appointing his close friend as a non‐executive director. The friend has experience of running a manufacturing company.
If this director is a close friend of Bill Bassoon, then it is possible that he will not be independent.
In addition, other than being a former chief executive, he does not have any relevant experience of the insurance industry and so it is questionable what value he will add to Trumpet. |
Only independent non‐executives with relevant experience and skills should be appointed to the board of Trumpet. Appointments should be based on merit and objective criteria and should promote diversity. The close friend of Wilson Galloon is unlikely to meet these criteria, as he has no experience in the insurance industry, and so should not be appointed.
Open advertising and/or an external search consultancy should be used for the appointment of the NEDs. |
The remuneration for directors is set by Emily Wei, the finance director.
However, no director should be involved in setting their own remuneration as this may result in excessive levels of pay being set.
Emily may pay more to directors who are willing to support his agenda in board meetings. |
The board should establish formal and transparent procedures for developing the policy for executive directors’ remuneration.
The remuneration committee should determine the policy for executive director remuneration, as well as set the remuneration for the chair, executive directors and senior management. |
All directors’ remuneration is in the form of an annual bonus.
Pay should motivate the directors to focus on the long‐term growth of the business.
Annual targets can encourage short‐term strategies rather than maximizing shareholder wealth. |
The remuneration of executives should be restructured to include a significant proportion aimed at long‐term, sustainable company performance. Shares awards should be released for sale on a phased basis and be subject to a total vesting and holding period of five years or more. |
In addition, non‐executive directors’ pay should not be based on meeting company targets as their pay should be independent of how the company performs. |
NED remuneration should be determined by the board. It should reflect time commitment and responsibilities of the role and should not include share options or other performance related elements.
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Trumpet does not currently have an audit committee.
Audit committees undertake an important role in that they help the directors to satisfy their responsibility of accountability with regards to maintaining an appropriate relationship with the company’s auditor.
Without an audit committee there is no oversight of the financial reporting processes of the company. |
Trumpet should appoint an audit committee as soon as possible. The committee should comprise at least three independent non-executives, one of whom should have relevant financial experience. |
A new sales director was appointed nine months ago, however, he has not undergone any board training.
All directors should receive induction training when they first join the board so that they are fully aware of their responsibilities.
The new sales director may not be fully effective in the role without the relevant training and induction. |
The new sales director should immediately receive relevant training from Wilson Galloon to ensure that he has a full understanding of his role and responsibilities. |
Trumpet is not planning to hold an annual general meeting (AGM) as the number of shareholders are such that it would be too costly and impractical.
However, the AGM is an important meeting in that it gives the shareholders an opportunity to raise any concerns, receive an answer and vote on important resolutions.
The proposal to send the financial statements and resolutions by email is not appropriate as it does not allow shareholders an opportunity to raise relevant questions. |
The company should continue to hold the AGM.
Sending information by email in advance of the meeting may be practical and save some costs; however, this should not be seen as a replacement for the AGM. |