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 EXAM FOCUS POINT 
In the context of non-executive directors, watch out for threats to, or questions over, their 
independence.
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CHAPTER 7
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CORPORATE GOVERNANCE AND SOCIAL RESPONSIBILITY 
 
189 
3.11.3 Remuneration committee
The remuneration committee plays the key role in establishing remuneration arrangements. In order to 
be effective, the committee needs to 
determine
both the organisation's 
general policy
on the 
remuneration of executive directors
and 
specific remuneration packages
for each director.
Measures to ensure that the committee is 
independent 
include not just requiring that the committee is 
staffed by non-executive directors, but also placing limits on the members' connection with the 
organisation. Measures to ensure independence include stating that the committee should have no 
personal interests other than as shareholders, no conflicts of interest and no day-to-day involvement in 
running the business.
3.11.4 Audit committee 
Audit committees of 
independent non-executive directors
should liaise with 
external audit
, 
supervise 
internal audit
, and 
review
the 
annual accounts
and 
internal controls
.
The main duties of the audit committee are as follows. 
Duty 
Committee's task 
Review of financial statements 
and systems 
They should review both the quarterly (if published) and annual 
accounts. 
Liaison with external auditors 
They appoint and remove external auditors and should help external 
auditors resolve any problems they may encounter.