SWi FT 3000 The new standard for Corporate

SWi. FT 3000 The new standard for Corporate Governance evaluation IMCA 7 September 2011 David W Duffy – Prospectus © Prospectus 2010

Agenda 1 What Is SWi. FT 3000? 2 What are the benefits? 3 Why should an organisation apply for the SWi. FT designation? 4 How to get ready for SWi. FT? © Prospectus 2010 2

1 What is SWIFT 3000? © Prospectus 2010 3

What is SWi. FT 3000? • Produced by a corporate governance working group convened by the NSAI and supported by Io. D, CGAI and IPA. • Provides a best practice Irish specification for the conduct of an external evaluation • Facilitates the external assessment of Corporate Governance performance by providing a standard framework of assessment of compliance with relevant codes • The assessment is confidential and voluntary • The objective is to assess the corporate governance frameworks of companies and specifically the level of compliance by companies with governance codes of best practice relevant to them: – OECD Principles – Combined Code on Corporate Governance – Code of Practice for the Governance of State Bodies © Prospectus 2010 4

Following codes are in development • ISE (UK code of Corporate Governance) for Irish Plc. 's • Corporate Governance Code for Credit Institutions and Insurance Undertakings • Corporate Governance Guidance and Principles for Unlisted Companies in Europe eco. Da • Codes In Development for; Family, SMB, Voluntary, Funds • Relevant sectoral Codes as approved for inclusion as they emerge © Prospectus 2010 5

SWi. FT 3000 – Scope and Process • Scope of the assessment will examine the following: – Board Composition – Board Processes – Execution of Board Role • Companies which meet the specifications of the Code will be awarded the SWi. FT 3000 Certification by independent accredited certification bodies. – Certification Europe – NSAI ey © Prospectus 2010 6

Assessment Methodology: Process Overview Phase 1 Planning & Preparation Phase 2 Initial Review Phase 3 Interview & Follow-Up © Prospectus 2010 7 Phase 4 Reporting & Follow-Up

The Main Bodies Involved in SWi. FT 3000 (Auditors) Association of Accredited Certification Bodies Oversight Committee Certification Body (CB) CB CB Audit Team - Technical + Process Auditor Client seeking certification to SWi. FT 3000 © Prospectus 2010 8 CB

The Main Bodies Involved in SWi. FT 3000 (Auditors) • In SWi. FT 3000 there are two types of auditor – ‘Technical Auditor’: • Any assessor on the list of ‘Appointed Assessors’ as maintained by the Oversight Committee. At present determined by successful completion of exam on approved affirmation courses. – ‘Process Auditor’ • A practicing & experienced management system auditor working with the CB, & approved under the ISO 17021 competence assessment. Furthermore will have attended a designated corporate governance affirmation course. © Prospectus 2010 9

SWi. FT 3000 – Scope and Process People interested in becoming accredited corporate governance assessors are required to: – Meet the criteria specified in Annex C – “Assessor qualifications and other conditions” as per NSAI SWi. FT 3000 available on www. nsai. ie; AND – Undertake and successfully complete a three day programme on corporate governance being run by Prospectus - www. prospectus. ie © Prospectus 2010 10

2 What are the benefits? © Prospectus 2010 11

Benefits of SWi. FT § Provides external, independent, validation of good business standards and a healthy Governance environment § Is an affirmation of a proper functioning business and Board § Certifies the right “tone from the top” § Benchmarks the Board against its peers § Will help in attracting higher calibre board members § Plays a part in restoring business trust and confidence in Ireland © Prospectus 2010 12

3 Why should an organisation apply for SWi. FT? © Prospectus 2010 13

The SWi. FT standard will set organisations apart for their high standards of corporate governance § Reassures stakeholders, staff, customers, suppliers and investors § Recognises a Board’s commitment to real Governance § Enhances reputation, profile, business § Sees past rhetoric and hollow written claims § Facilitates real openness and transparency © Prospectus 2010 14

4 How to get ready for SWi. FT? © Prospectus 2010 15

Getting ready for SWIFT Diagnostic Improvement plan Key gaps SWIFT Ready >>>>> following shows the elements of the SWIFT process © Prospectus 2010 16

Scope of the Assessment The Corporate Governance Assessment involves examination of three core areas: • Board composition • Board processes • How the Board executes its role These 3 areas encapsulate the main principles of the relevant codes of Corporate Governance best practice. © Prospectus 2010 17

The Assessment Methodology The assessment methodology is crucially evidence based and principally relies on the following: • Board documents & records relevant to the scope of the Assessment • Questionnaires • Interviews © Prospectus 2010 18

Key headings for the evaluation Core competency Assessment rating average Main principles (0 to 4) A. The Company 1 A 1 The Board 4 2 A 2 The Chairman and CEO 4 3 A 3 Board balance and independence 4 4 A 4 Appointments to the Board 2 5 A 5 Information and Professional Development 2 6 A 6 Performance Evaluation 2 7 A 7 Re-election 2 B. Remuneration 8 B. 1 Level and Make-up of Remuneration 3 9 B. 2 Remuneration Procedure 3 C. Accountability and Audit C. 1 Financial Reporting 4 4 4 3. 17 10 11 C. 2 Internal Control 12 Rating C. 3 Audit Committee and Auditors © Prospectus 2010 19

A sample of Board Documents that could be reviewed § § § Board procedures, board documents, records Board terms of reference List of matters reserved for board's decision Schedule of board and committee meetings for the prior and current year An appropriate sample of board meeting agenda and supporting documentation Board Minutes Internal audit work plan Audit committee papers Committee terms of reference latest set of annual report and accounts Strategic plan © Prospectus 2010 20

A sample of pre-assessment Questionnaire (to Board members) The Board • • • By what means does the board direct and control the company? Does the board have processes in place for succession planning? Has the board ensured that systems of risk Management and other systems of internal control are established and operate in practice? Board balance regarding appointments and independence • Are the range of skills, knowledge and experience on the board appropriate? Information flows • • Is the form and quality of the information supplied to the board appropriate to enable it to discharge its duties? How does the company secretary ensure good information flows between senior Management and non-executive directors? © Prospectus 2010 21

A sample pre-assessment Questionnaire (to the Company Secretary or Designated Representative) Board • • • What committees are established and who are the members? Are the mandates for the board and committees clear and effectively defined? Are there independent directors and do they meet the independence criteria in the Combined Code? Has the board appointed an independent non-executive director to be the senior independent director? Do all directors receive induction on joining the board? Board evaluation • • • Does the board undertake a formal and rigorous annual evaluation of its own performance? Does a similar evaluation of the performance of committees take place? Is the performance of individual directors also evaluated? © Prospectus 2010 22

A sample pre-assessment Questionnaire (to the Company Secretary or Designated Representative) Remuneration • Is there a board remuneration committee operating in accordance with the provisions of the Combined Code? • Are there procedures in place to avoid conflicts of interest in setting levels of remuneration? Accountability and Audit • Has the board adopted policies governing corporate conduct, including compliance with applicable laws and regulations? • Does at least one member of the audit committee have recent and relevant financial experience? © Prospectus 2010 23

Detailed review of Board Composition • Responsibilities of the board • • Composition and structure of the board • • Balance and Diversity • • Skills expertise and experience • • Chairman/CEO separation • • Election of directors • • Time commitment • • Board Independence • • Composition of board committees • • Role of the chair © Prospectus 2010 24 Lead independent director Company secretary Knowledge of company Appointment of directors Information on board nominees Board induction, and development Related Party Transactions Director Declarations Conflicts of Interest

Board processes Processes relate to the underlying mechanisms used by the board. The following are assessed: § § § § Collective responsibility of the board, Terms of reference (Board and Committee(s), Matters/decisions reserved for the board/Management, Board meeting process, Committee meetings, Decision making process, Information flows (between Management and the board and between the board and stakeholders). © Prospectus 2010 25

Finally, some thought's and observations…. • Moving beyond ticks in boxes, “hassle” to embedded CG environments • Reputational risk damage, is a strong driver and desire to avoid the mistakes of the past • Genuine desire to improve business culture is more evident • This is unique in Europe! © Prospectus 2010 26

SWi. FT Programme Leaders Title: Head of HR Practice, Prospectus Email: pangulo@prospectus. ie Phone: +353 1 218 0319 Fax: +353 1 260 3130 Title: Director, Prospectus Email: dduffy@prospectus. ie Phone: +353 1 218 0304 Fax: +353 1 260 3130 David is the founder and a director of Prospectus. He graduated from Trinity College Dublin with a Bachelor of Business Studies Degree and is a Chartered Accountant. He also holds an MBA from IMD in Lausanne, Switzerland Pedro is responsible for the ongoing development of the Prospectus HR Consultancy Practice, including business development and the delivery of innovative HRM and organisational development initiatives and projects He has extensive experience in planning and implementing significant strategic, management and organisational change, and advising on corporate governance in the public, private and not for profit sectors He is a member of the Institute of Directors and was President of the Institute of Management Consultants in 1992 and 2007 He is also the author of a book published by Prospectus in May 2004, titled “The Management of Management – A practical guide to Corporate Governance”. Prospectus is bringing out a new book on corporate governance in the 2011 to build on the success of the last publication David has led the governance reviews of a number of organisations including: Institute of Taxation in Ireland, HEA, Royal Hospital Donnybrook, National University of Ireland at Maynooth; St Vincent’s Healthcare Group; EBS, Health Research Board; Revenue Commissioners. Radiological Protection Institute of Ireland; Public Appointments Commission © Prospectus 2010 He has over 10 years HR consulting and executive development experience. Prior to joining Prospectus Mr. Angulo has worked in senior management roles in Penna, Deloitte, IBM Business Consulting Services and Pricewaterhouse. Coopers in Dublin Pedro has led the design and implementation of large-scale human resources with both national and international clients, in the public and private sectors. Some of his clients include: DIT, Integration Centre, British American Tobacco, Holcim, UCD, ESB, National Concert Hall, Combat Poverty Ireland, Bord Gais Eireann, INTO, Port of Cork, European Rugby Cup, St. James’s Hospital, National University of Ireland, DSFA, Musgrave, ICON, O 2, Permanent TSB, Teagasc, Enterprise Ireland, Glanbia, Tesco, AIB, Revenue Commissioners, Diageo, and Kimberly Clarke For a number of years, Pedro has been a part-time senior lecturer and examiner in the Michael Smurfit Graduate Business School Pedro holds an MBS in Management from UCD, is a member of the IMCA, and a Board member of the EMCC 27

Getting Ready for SWIFT - The Three Day Training Programme Objectives and Agenda • At the end of this programme participants will have: – A clear understanding of SWIFT 3000 – Improved their knowledge of the Codes – Further develop their corporate governance assessment skills © Prospectus 2010 28