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Dec 7, 2009
ROLE OF INDEPENDENT DIRECTORS
Good corporate governance vital
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I READ with interest Goh Eng Yeow's commentary, 'Clarify role of independent director' (Nov 30). The call to clarify the role of an independent director is timely. Independent directors are generally expected to bring fresh perspectives on the board's direction, constructively challenge management, and chair and sit on key watchdog committees.
Whether they should be expected to advocate the interests of minority shareholders in conflicts is unclear. Indeed, Section 157 of the Companies Act, which provides for directors' duties, does not charge them with this affirmative duty. Directors are generally expected to act in the company's best interests, not just for the benefit of any particular group.
Nevertheless, few would disagree that independent directors should not turn a blind eye when there is flagrant oppression of minority shareholders. After all, minority shareholders' interests are recognised and protected under various codes of corporate governance.
Independent directors, by virtue of their board membership and independence from management, are in a good position to ensure fairness and equality across the entire shareholder spectrum.
Recent boardroom tussles suggest that some minority shareholders perceive (erroneously or not) that an independent director's role includes championing their interests. Against this backdrop, provisions clarifying when and how independent directors can protect minority shareholders' interests would be helpful. Such provisions let minority shareholders know what to expect each time they seek independent directors' intervention in shareholder conflicts.
There is a caveat: The mere existence of such provisions is no panacea, especially when companies implement them in a formalistic and mechanistic manner. The efficacy of corporate governance reforms hinges on the strength of the company's corporate governance culture.
Good corporate governance goes beyond complying with mandatory minimum standards and 'ticking the boxes'. The key phrase is substantive compliance: Companies should adhere to both the form and the spirit of corporate governance norms. In the boardroom, this involves candour, open debate and dissent, and providing full access to relevant information. Without these elements, any provision clarifying an independent director's role, no matter how well drafted, is meaningless.
Nick Sim
ROLE OF INDEPENDENT DIRECTORS
Good corporate governance vital
<!-- by line --><!-- end by line -->
<!-- end left side bar --><!-- story content : start -->
I READ with interest Goh Eng Yeow's commentary, 'Clarify role of independent director' (Nov 30). The call to clarify the role of an independent director is timely. Independent directors are generally expected to bring fresh perspectives on the board's direction, constructively challenge management, and chair and sit on key watchdog committees.
Whether they should be expected to advocate the interests of minority shareholders in conflicts is unclear. Indeed, Section 157 of the Companies Act, which provides for directors' duties, does not charge them with this affirmative duty. Directors are generally expected to act in the company's best interests, not just for the benefit of any particular group.
Nevertheless, few would disagree that independent directors should not turn a blind eye when there is flagrant oppression of minority shareholders. After all, minority shareholders' interests are recognised and protected under various codes of corporate governance.
Independent directors, by virtue of their board membership and independence from management, are in a good position to ensure fairness and equality across the entire shareholder spectrum.
Recent boardroom tussles suggest that some minority shareholders perceive (erroneously or not) that an independent director's role includes championing their interests. Against this backdrop, provisions clarifying when and how independent directors can protect minority shareholders' interests would be helpful. Such provisions let minority shareholders know what to expect each time they seek independent directors' intervention in shareholder conflicts.
There is a caveat: The mere existence of such provisions is no panacea, especially when companies implement them in a formalistic and mechanistic manner. The efficacy of corporate governance reforms hinges on the strength of the company's corporate governance culture.
Good corporate governance goes beyond complying with mandatory minimum standards and 'ticking the boxes'. The key phrase is substantive compliance: Companies should adhere to both the form and the spirit of corporate governance norms. In the boardroom, this involves candour, open debate and dissent, and providing full access to relevant information. Without these elements, any provision clarifying an independent director's role, no matter how well drafted, is meaningless.
Nick Sim
