Southern Cross University: ACC03043 NED Appointment Criteria Report

This report addresses the essential criteria for the appointment of non-executive directors (NEDs) to a company's board, referencing the Corporations Act 2001 (Cth) and the ASX Corporate Governance Council's principles. It emphasizes the importance of NEDs in independent management, policy formulation, and planning. The report outlines a selection process involving assessing current board competencies, establishing selection criteria based on education, experience, and diversity, and obtaining candidate consent. It details the required resolutions for appointment, the maximum three-year term, and the contents of the appointment letter, including terms, remuneration, duties, and functions as per the board charter. The document provides a practical guide to ensure compliance with legal and governance standards, promoting effective board composition and corporate governance practices. The report incorporates references to relevant legislation and guidelines to support its findings.

Corporate Governance

MEMO
TO: Board of Directors
FROM: Management Consultant
DATE: 19th July 2018.
RE: Essential criteria for the appointment of the non-executive directors to the board
The company is required to abide by the requirements as stated in the Corporations Act, 2001
(Cth). In addition to this, the company being the listed company falls within the framework of
Corporate Governance Principles, laid down by the ASX Corporate Governance Council and
the related recommendations (Lester, Yoon and Lovells, 2017). Appointment of non-
executive directors is a sign of good governance (Australian Institute of Company Directors,
2018a).
As the non- executive directors are appointed to strengthen the board of the directors in terms
of independent management, diligent policy formulation and planning; the current board’s
competencies and qualities must be assessed (Australian Institute of Company Directors,
2018b). This should be followed by developing a selection criterion for the individual in
terms of education, experience, and diversity policy. The candidate should also give his or
her consent for the said appointment.
The directors or the shareholders must pass the resolution appointing the non-executive
director (Du Plessis, Hargovan and Bagaric, 2011). In case the directors pass the resolution,
the same is required to be confirmed by the shareholders through a resolution in the next
annual general meeting of the company. The term of the appointment would be maximum of
three years.

The letter of the appointment of the non-executive director must be signed and should clearly
state the terms of appointment, remuneration as determined by the shareholders and the ratio
for distribution as decided by the directors; the duties, and the functions as comprised in the
board charter (Australian Government Federal Register of Legislation, 2018).

References
Australian Government Federal Register of Legislation. (2018). Corporations Act 2001.
[online] Available from: https://www.legislation.gov.au/Details/C2018C00275 [Accessed:
20/07/18].
Australian Institute of Company Directors. (2018a) Role of non-executive directors. [online]
Available from: https://aicd.companydirectors.com.au/-/media/cd2/resources/director-
resources/director-tools/pdf/05446-1-11-mem-director-tools-bc-non-executive-
directors_a4_web.ashx [Accessed: 19/07/18].
Australian Institute of Company Directors. (2018b) The differences between executive and
non-executive directors. [online] Available from:
http://aicd.companydirectors.com.au/resources/all-sectors/the-differences-between-executive-
and-non-executive-directors [Accessed: 19/07/18].
Du Plessis, J. J., Hargovan, A. and Bagaric, M., (2011) Principles of contemporary corporate
governance. Port Melbourne: Cambridge University Press.
Lester, T., Yoon, J., and Lovells, H. (2017) Corporate governance and directors' duties in
Australia: overview. [online] Available from: https://uk.practicallaw.thomsonreuters.com/1-
502-9743?
transitionType=Default&contextData=(sc.Default)&firstPage=true&comp=pluk&bhcp=1#co
_anchor_a382470 [Accessed: 19/07/18].