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28 Chapter 2 - Good Governance: Managing Internal Risk• The Audit Finance Committee meets and works with internal and external auditors without theparticipation of management in an effort to understand issues of control and the veracity of accountingand financial statements. This committee is involved in selecting external auditors and in hiring andoverseeing the work of the internal auditor.• The Compensation Personnel Committee oversees the administration of human resources and thedevelopment of personnel policies and procedures. This committee ensures appropriate hiring of andcompensation for the CEO and other top managers. The committee may also be responsible forevaluation of the CEO’s performance.• The Risk Management and Investment Committee examines issues of asset and liability management.This examination includes making sure that management is adequately monitoring and addressingportfolio risks, maturity mismatches, and currency risks, as well as the need for financial resources inthe form of loans and equity investment. This committee may also address the MFI’s compliance withlegal, regulatory, and funder requirements, as well as the timeliness and completeness of reporting.The role of the CEOThe CEO guides and supports the board’s activities. As the MFI’s top manager, the CEO has the advantage ofhaving intimate knowledge of the institution’s operations and performance. A primary function, therefore, is toensure that the board has adequate information to make informed decisions in governance and oversight. TheCEO’s main responsibilities include the following:• Articulate MFI strategy to the board, and assist members to review, modify, and approve the businessplan.• Supply and structure information and materials to the board meetings to facilitate board action anddecision making.• Provide timely and accurate financial and operational reports to the board and committee meetings toassist in monitoring performance and progress.• In conjunction with the board, develop institutional performance indicators in line with the institutionalmission and the triple bottom line.• Attend all appropriate board and committee meetings, and be available to answer questions of boardmembers prior to and during such meetings.• Assist in selecting and orienting new board members.The Board of Directors: Effective ProcessesBoard meetingsThe purpose of the full board meeting is to exchange information and make key decisions. These meetings maybe held quarterly or monthly (as mandated by government regulation or board bylaws) and should be structuredto deal quickly with routine tasks to leave sufficient time for strategic issues. To allow board members timeto read and prepare for the meeting, a board should develop a standard agenda with relevant materials that isdistributed in advance (see box 2.6). A board secretary should be appointed to record detailed minutes of themeeting. During the meeting, the chair should guide the meeting according to the agenda and try to adhere tothe meeting timetable, but also allow time for adequate discussion and input by members.
Managing Risk and Creating Value with Microfinance29Most of a board’s work occurs in committee meetings and is brought to the full board for discussion and finaldecision. In the interest of full transparency, board members should never discuss agenda items outside of thecommittee meeting or full board meeting. Board decisions should be taken by consensus whenever possible.Voting on issues may be necessary from time to time, but frequently resolving issues by vote may indicate thatmembers are divided by vision or priorities.Management reviewsThe primary role and challenge of the board is to hold management accountable. There are formal means to dothis during board meetings, committee meetings, and regular reporting, but boards should schedule an annualor semi-annual performance review of the CEO. Perhaps the most important role for the board is to establishtransparent, fair, and measurable benchmarks for management’s performance. These rules should be closely linkedto the MFI’s business plan, but should include elements that measure the CEO’s effective management of staff,physical and financial resources, and management’s demonstrated commitment to the institution’s mission.Box 2.6 Sample Board Meeng Agenda1. Review of agenda and addion of new items2. Review of previous meeng minutes3. CEO’s presentaon of management report, including acon items from previous meeng4. Review of financial performance:a. Year-to-date performance versus planb. Asset quality (loan porolio and other investments)c. Key indicators (profitability, efficiency and producvity, and outreach)d. Credit exposure (by product, geography, and industry)e. Individual branch performance5. Review of social performance versus plan6. Management presentaon on external environmenta. Marketb. Compeonc. Fundersd. Regulaon7. Compliance reporta. Regulaonsb. Report on meliness of external reporngc. Contract covenants and targets8. Treasury report and risk management issuesa. Budget updateb. Liquidity and access to fundsc. Asset/liability mismatches9. Human resources update10. Internal auditor presentaon11. Technology updates and other items12. Idenficaon and documentaon of acon itemsSource: Ledgerwood and White 2006.
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Eco-AuditEnvironmental Benefits Sta
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