Page 170 - F1 - AB Integrated Workbook STUDENT 2018-19

Chapter 11

2.4 Independence

NEDs should be independent as far as possible, in order to ensure that their
oversight role can be carried out as effectively and responsibly as possible.

NEDs must not:

Have been an Have had a material Participate in the
employee of the business interest in the company’s share
company in the company for the last option or pension
last five years three years schemes

Have close ties with Serve as a NED for
the company more than nine
directors or senior years with the
employees same company

If any of these apply to a NED, their independence will be seriously compromised.

2.5 Other recommendations

 At least half the board should be independent NEDs (excluding the Chairman of
the Board, which is often also a NED). A smaller company should have at least
two independent NEDs.

 One of the independent NEDs should be appointed to be the ‘senior
independent director’. They are available to be contacted by shareholders who
wish to raise matters outside the normal executive channels of communication.

 Executive directors and NEDs would typically be required to stand for re-
election by shareholders every three years. NEDS who have been with the
company for over nine years must stand for re-election on an annual basis.

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