Independent And Non Executive Directors

There are a number of people that are critical to the corporate process. These include the directors of corporations, officers, and shareholders. The primary role of the directors is that of oversight (Loewenstein, 1998). The directors are hired by the shareholders, and their duty is to oversee the actions of the corporate executive. The directors hire the CEO and set his/her salary and benefits. The directors also play a role in oversight of the strategy and operations - this tells them about the merits of the executive that they have hired. Since Sarbanes-Oxley (SOX) was enacted, directors have seen their oversight role expanded (Skinner, 2006). There must be within the director group some financial experience to provide explicit financial oversight of the firm. The law prescribes certain committees as well, including audit and compensation committees, and SOX has also increased the liability that director's face, while expanding the role that directors play in the firm.

The appointment of independent directors became very necessary, as shareholders looked for a way by which management became more responsible and accountable, and as such; the need for independent directors, who would not only checkmate the excesses of the board of directors, but also have the interest of the company and the shareholders at heart.

Their employees are united by the strong values of accountability, respect, teamwork and integrity. They make sure that extraordinary ethical standards, and a steady commitment to safety, invade company’s organization. Some of corporate governance has found lacking as following its area;

In general, the corporations work towards meeting the end goal of adding value to its shareholders and/or stakeholders, but the way this ‘value is added and who is given priority while adding this value’ depends on the ‘perspectives’ (session1 slides) corporations choose to fulfill the objective of the given corporation. Corporation structures involve executive management, board of directors and its internal and external stakeholders. The executive management are at the helm of running the company, executing strategy and managing company operations, while corporate boards are supposed to keep an ‘careful watch’ and guide executive management activity. Boards are primarily performing ‘advisory and monitoring’ functions i) by acting independently in the interest of the corporation ii) guide management by taking ‘un-biased’ stand and at times taking opposing viewpoint than the company’s management iii) select, evaluate, and compensate Chief Executive Officer(CEO) and executive management oversee succession planning(session1)iv) review and monitor company performance while minimizing company costs v) risk identification, risk mitigation and risk avoidance guidance, governance and vi) guidance to CEO and senior management around strategic and operational direction of the organization.

Taking a geographical perspective to the evolution of corporate governance and by extension, idea of the board of directors as a self-regulating social system. There has been three differing perspectives, the two tiered board, legislated compliance and the voluntary or ‘if not why not’ compliance. The reasons for this are

Boards of Directors are mandated by business law to carry out their responsibilities with the notion of operating in the best interest of the corporation. This is largely interpreted as operating “in the best interest of the shareholder” or maximizing shareholders value. “However, there are situations in which the company’s “best interest” doesn’t match the best interest of its shareholders. It’s left to boards of directors to make these company “best interest” decisions.” (Gillan, and Starks, 2000) Boards of directors are made up of two kinds of agents: inside and outside directors (independent directors). Inside directors are employees of the company, usually company CEO’s, CFO’s, and/or other high level company executives. Inside directors are held accountable for authorizing budgets created by company executives, creating and overseeing the company’s business policy, and authorizing important corporate plans and ventures. Outside directors are chosen externally; they’re non-employees. The sole reason for having independent directors on boards is to add

In recent years，with the failures, people in prominent organisations are going to be requested to consider the applicability of their corporate governance. Moreover, the ‘Enterprise and Regulatory Reform Act 2013’ allowed the shareholders in UK have a binding vote on executive compensations. Corporate governance is defined as the regulations which are aimed to control those responsible for administrating an organisation (Boddy, 2014:p99). The wholesome corporate governance has been established through the supervision of external market and the internal positive enterprise culture. It can influence the share price and raising capital costs of a business. The good quality of a firm’s corporate governance is determined by the power of

This review intends to explain the author’s U.S. corporate governance system. Moreover, it tries to explain the system and rules for making decision of the board of directors, managers, stakeholders, and shareholders. In “A Primer on Corporate Governance”, author Cornelis A. de Kluyver, dean of the University of Oregon, provides an explanation of the American system on corporate governance. De Kluyver writes this book for students and executives who wish to enter the world of management; that includes working or dealing with a board of directions in a corporation. This book intends to expand their knowledge of management and governance. The author starts by giving a summary on the history of the U.S corporate governance system. The first part of the book shows how important it is to keep a balance of power within the corporate governance. The second part of the book focuses on the responsibilities of the board, such as selection of CEO, risk management, strategy development, unexpected events and crises. Its purpose is to inform students and future executives of the importance of corporate governance and the function of the board of directors, because it seems that most people have received little to no formal training in these subjects.

The U.S. has separation of ownership and management. SOX gave the SEC the ability to prevent people from serving as officers and directors. Non-executive directors oversee the managers’ performance. The board of directors includes the executive & the non-executive directors who plan the path of the organization. The independent directors’ main responsibility is to manage all activities of the management board.

Independence in corporate governance fosters good management with no conflict of interest. A company board made-up of independent directors enables those

Audit quality is an important element of corporate governance – although it’s unclear whether audit quality and other aspects of corporate governance (e.g. director knowledge and independence) are fundamentally complements or substitutes.

The person who is responsible for the conduct of business activities of an enterprise is usually referred to as the “Director” of a company. They are also known as the “Managers” of the entity and are elected by the shareholders during the members meeting. Once elected, the list of directors need to be lodged with ASIC. Often the director is seen as the face of the company and is synonymous with its brand value.The main role of the director is two-fold:

It requires that boards of all companies listed in the U.S. should consist of a majority of members of independent directors in order to enhance internal control. Although independent directors are directly hired by the votes of shareholders, they does not belong to the employees of the company. It is expected that they are able to take the fiduciary responsibility to monitor management at the best interests of shareholders. Similarly, the U.K also enacts relevant regulation, corporate governance code (Council, 2010), which requires the U.K. listed companies at least contain one third non-executive directors on the board in order to effectively monitor the management behaviours. Although governments enhance the manager-monitoring function and corporate reliability within companies by increasing the number of outside directors on boards, it is unknown whether there is a positive relationship between the higher proportion of outside directors and corporate performance.

Corporate governance generally refers to processes by which the organizations are directed, controlled and held to account and is underpinned by principles of openness, integrity and accountability.[1]

Corporate governance is concerned with ways in which all parties interested in the well-being of the firm (the stakeholders) attempt to ensure that managers and other insiders take measures or adopt mechanisms that safeguard the interests of the stakeholders. Such measures are necessitated by the separation of ownership from management, an increasingly vital feature of the modern firm. A typical firm is characterized by numerous owners having no management function, and managers with no equity interest in the firm. Shareholders, or owners of equity, are generally large in number, and an average shareholder controls a minute proportion of the