Corporate Governance Framework

November 2019

Introduction

The Board of Directors of Bank Audi aims at achieving the Group’s long-term success through the implementation of Governance practices that promote continuity, consistency, and effectiveness in the way the Board operates and governs the Bank.

The year 2018 witnessed continuing political and economic uncertainties in the Group’s main countries of presence, entailing a particular attention by the Board to prudent and effective controls, within a continuous focus on ensuring strategic direction and management supervision. The year was also characterised by the entry into effect of IFRS 9, that entailed a particular supervision by the Board and by its Audit and Risk Committees, as well as the adoption and implementation of specific policies, and the creation of a special IFRS 9 Management Committee to oversee implementation and adopt accounting treatments. Other changes introduced to the Governance framework of the Bank during 2018 included the adoption of a comprehensive Board members succession plan, as well as the adoption, review and/or update of a number of policies. The Board also continued to monitor the evolution in Governance-related regulations and best practices in order to ensure that the necessary changes are introduced to its own guidelines and processes, and to ensure that the Bank’s business and operations are conducted with integrity and in compliance with the relevant laws, regulations, internationally accepted principles and best practices of Corporate Governance and business ethics.

The Board is satisfied that, in 2018, it fully discharged all its responsibilities, as mapped in its yearly rolling agenda, and acted on the recommendations of its committees in a way to meet its obligations towards its shareholders and to all other stakeholders. The Board is also satisfied that the Bank’s Governance framework conforms to applicable directives and guidelines, and is adapted to the Bank’s needs and to the high expectations of its stakeholders.

Governance Framework

Bank Audi is governed by a Board of Directors consisting of up to 12 members (currently 9) elected by the General Assembly of shareholders for terms not exceeding 3 years. The responsibility of the Board is to ensure strategic direction, management supervision and adequate control of the company, with the ultimate goal of increasing the long-term value of the Bank.

Bank Audi’s Governance framework and that of its major banking subsidiaries encompass a number of policies, charters, and terms of reference that shape the Group’s Governance framework over a wide range of issues including risk supervision, compliance, AML/CFT, audit, remuneration, evaluation, succession planning, ethics and conduct, budgeting, and capital management. Clear lines of responsibility and accountability are in place throughout the organisation with a continuous chain of supervision for the Group as a whole, including effective channels of communication of the Group Executive Committee’s guidance and core group strategy. Strategic objectives setting corporate values and promoting high standards of conduct have been established and widely communicated throughout the Group, providing appropriate incentives to ensure professional behaviour.

The Bank’s Corporate Governance Guidelines are accessible on the following link.

The Board is supported in carrying out its duties by the Audit Committee, the Risk Committee, the Remuneration Committee, the Compliance/ AML/CFT Board Committee, the Corporate Governance and Nomination Committee, and the Executive Committee.

  • The mission of the Group Audit Committee is to assist the Board in fulfilling its oversight responsibilities as regards: (i) the adequacy of accounting and financial reporting policies; (ii) the integrity of the financial statements and the reliability of disclosures; (iii) the appointment, remuneration, qualifications, independence and effectiveness of the external auditors; and (iv) the independence and effectiveness of the internal audit function 1.
  • The mission of the Group Risk Committee is to assist the Board in discharging its risk-related responsibilities. The Committee is expected to: (i) consider and recommend the Group’s risk policies and risk appetite to the Board; (ii) monitor the Group’s risk profile for all types of risks; and (iii) oversee the management framework of the aforementioned risks, and assess its effectiveness.
  • The mission of the Remuneration Committee is to assist the Board in maintaining a set of values and incentives for Group executives and employees that are focused on performance and promote integrity, fairness, loyalty and meritocracy.
  • The mission of the Compliance/AML/CFT Board Committee is to assist the Board of Directors in its functions and supervisory role with respect to: (i) fighting money laundering and terrorist financing and understanding the related risks, and assisting it with making the appropriate decisions in this regard; (ii) protecting the Bank from other compliance-related risks, and, more generally, overseeing the Bank’s compliance with applicable laws, policies and regulations.
  • The mission of the Corporate Governance and Nomination Committee is to assist the Board in maintaining an effective institutional and Corporate Governance framework for the Group, an optimal Board composition, and effective Board processes and structure.
  • The mission of the Group Executive Committee is to develop and implement business policies for the Bank and to issue guidance for the Group within the strategy approved by the Board. The Group Executive Committee also supports the Group Chief Executive Officer in the day-to-day running of the Bank and in guiding the Group.

Remuneration Policy And Practices

Based on the recommendation of its Remuneration Committee, the Board has approved a “Group Compensation and Benefits Policy” founded on the following principles:

  • The objective of the Policy is to establish coherent and transparent Compensation and Benefits practices in the Bank and the Group, that are consistent with the Bank’s culture, business, long-term objectives, risk strategy, performance, and control environment, as well as with legal and regulatory requirements.
  • It is Bank Audi’s policy to provide all employees of the Group with a comprehensive and competitive compensation package that is commensurate with each employee’s position, grade and performance. Such performance is assessed on the following 3 performance criteria: key job responsibilities, SMART business goals, and behavioural competencies. Individual compensations are also linked to the achievement of objectives and are aligned with prudent risk taking. The compensation and benefits of control functions are determined in a way that preserves their objectivity and independence.
  • The aggregate consolidated amount of compensation and benefits paid by the Bank is included in the annual budget approved by the Board and is set in a way not to affect the Group’s medium and long-term capacity to sustain such levels of compensation nor its financial position or its interests.
  • Core Compensation and Benefits include basic salary and performance-based bonus (in addition to a number of ancillary benefits including individual and family medical coverage, education allowances, and others).

There is currently no outstanding stock-related compensation. And there are no compensation arrangements encompassing claw backs or deferrals of payments, save for matters resulting from applicable laws and regulations. Amounts of compensation paid annually are disclosed in accordance with the International Financial Reporting Standards and with the provisions of Article 158 of the Lebanese Code of Commerce.
1It is not the duty of the Audit Committee to plan or to conduct audits or make specific determinations that the Bank’s statements and disclosures are complete and accurate, nor is it its duty to assure compliance with laws, regulations and the Bank’s Code of Ethics and Conduct. These are the responsibilities of Management and/or of external auditors.

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