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Chapter 3
2.2 Non-executive directors
Strategy role – challenging strategy, offering advice and
contributing toward strategic success
Scrutinising role – hold executive directors to account for
decisions taken and results obtained
Risk role – ensure adequate system of internal controls and
system of risk management in place
People role – oversee the appointment and remuneration of
executive directors
2.3 Independence
The board should include a balance of NEDs and executives to reduce an
unfavourable balance of power towards executives.
The board should consist of half independent NEDs excluding the chair
One NED should be the senior independent director who is directly available to
shareholders if they have concerns which cannot or should not be dealt with
through the appropriate channels of chairman, CEO or finance director.
Reasons for NED independence
To provide a detached and objective view of board decisions.
To provide expertise and communicate effectively.
To provide shareholders with an independent voice on the board.
To provide confidence in corporate governance.
To reduce accusations of self-interest in the behaviour of executives.
2.4 Threats to independence
Material business relationship in last 3 years
Employee in last 5 years
Cross directorship in other companies
Remuneration form the company besides director’s fee
Close family ties with director
Significant shareholder
Serves on board for more than 9 years
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