Page 10 - CIMA SCS Workbook February 2019 - Day 1 Suggested Solutions

CIMA FEBRUARY 2019 – STRATEGIC CASE STUDY

CEO and Chair roles

These roles have been split at Vita which is compliant with most countries’ corporate governance
guidance.

The Chair’s role is to run the Board; the CEO’s role is to run the company. Placing both in one
person’s hands may give them too much power. Given that Vita would not have sufficient NEDs to
keep such power ‘in check’ it is important that it is not in one person’s hands.

The Chair is the representative of the shareholders – they should be able to communicate any
matters of concern to the Chair. Darryl Menuhin is Vita’s Chairwoman, we have no background on
her, but if she is not independent the Board should appoint a senior Independent NED to perform
this role.

Committees

There is only mention of one committee at Vita at present, the Audit committee, although that
does not mean others do not exist.

All committees make use of NEDs under most corporate governance codes. The compulsory
committees are: Remuneration, Nominations and Audit committee.

Vita’s Audit committee should have at least three, or in the case of smaller companies two,
independent non-executive directors. In smaller companies the company chair may be a member
of, but not chair, the committee in addition to the independent non-executive directors, provided
she was considered independent on appointment as Chair. At least one member of the audit
committee should have recent and relevant financial experience. Vita could satisfy most of the
criteria regardless of whether they were considered small or not, although with revenue
exceeding N$4,000,000,000 it is unlikely they would be classed as small. An issue could be the
uncertainty about whether any of the NEDs have any recent and relevant financial experience.

The Remuneration committee should have at least three, or in the case of smaller companies two,
independent non-executive directors. In addition the company chair may also be a member of,
but not chair, the committee if she was considered independent on appointment as chair. For
Vita, either criteria could be met, so in theory it could exist.

The Nomination committee is usually expected to have a majority of NEDs, so again could feasibly
be in existence at Vita.

As there are only three NEDs they are likely to be on all the committees, which would give them
significant power and a significant workload.

Overall

The biggest concern would be the lack of a Legal director, given litigation is viewed as having
significant impact on this risk register. Also of concern would be the number of NEDs and the
existence/makeup of the compulsory committees.

50 KAPLAN PUBLISHING