Explain the Corporations Act Requirements Relating to the Composition and Operation

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The Answer is The board of directors is the central cog in an organisation's corporate governance strategies and practices.Both explicitly and implicitly,the corporate governance tone of an organisation is set by the board.Consequently,it would be very unlikely for an organisation to have quality corporate governance in conjunction with a dysfunctional and poorly performing board.This then leads to consideration of the "optimal" composition for a board of directors.Unfortunately,there is no simple answer.The reality is that a board composition suited for a particular organisation in a specific industry might be totally unsuited for another organisation in a different industry.However,while there is no exact template for the "optimal" board of directors in all circumstances,there are some key generic features of many boards that facilitate their operation,and consequently the organisation's corporate governance.Not surprisingly,there is no one optimal "size" for a board.However,in terms of the legal minimum,s.201A of the Corporations Act specifies that a proprietary company must have at least one director who must ordinarily reside in Australia.A public company must have at least three directors,of which at least two must ordinarily reside in Australia.From a more conceptual perspective,the balance needs to be such that there are sufficient board members to enable streamlined decision making,but not so many members such that decision making and board discussion becomes cumbersome.Given the importance of the board of directors to many aspects of a company's operations,including the facilitation of corporate governance,a logical starting point is to consider the board's required skill base.The ASX CGC's Corporate Governance Principles and Recommendations states : "In order to be able to discharge its mandate effectively the board should comprise directors possessing an appropriate range of skills and expertise".What constitutes an "appropriate range of skills and expertise" is obviously open to interpretation and will certainly be dependent upon the individual needs of companies.There is no doubt that all boards need to have individuals with skills,expertise and a moral disposition relevant to the company they represent.The composition and skill base of the board needs to be such that it understands and has the competence to deal with the issues of the business.Commensurate with this expectation is that the board,in aggregate,will have a detailed understanding of the company and the industry in which it operates.From the above,a board needs to have individual directors with appropriate knowledge,experience,contacts and ethical disposition.They play a particularly important role so it is somewhat surprising to see that there are few prerequisites to becoming a director under the Corporations Act.Simply,a director needs to be an individual over the age of 18 ).As long as an individual has not committed a serious indictable offence and has managed to avoid bankruptcy,he or she is eligible to act as a company director.Paradoxically,a lack of business experience or professional or higher education qualifications do not appear to be a legal constraint to act as a company director.

Explain the Corporations Act Requirements Relating to the Composition and Operation

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