Essays on Non-Executive Independent Board: Reason for and Against Coursework

Download full paperFile format: .doc, available for editing

In general, the paper 'Non-Executive Independent Board: Reason for and Against" is an outstanding example of business coursework.   Globally, the role of the non-executive independent board is a hotly-debated and one of the important subjects within the field of corporate governance (Iwu-Egwuonwu, 2010). The issues of board structure and processes, defined in terms of board size, the establishment of various committees, the separation of the posts of the chairman of the board and the CEO, and non-executive director independence and representation have been central to management reforms throughout the globe (Weir, Talavera & Muravyev, 2008:3).

Although the role of the non-executive independent board in organization/companies has attracted renewed attention, the results are quite mixed. This could be linked to the fact that there is no clear definition which encompasses the various dimensions of the board like their professional experience. A non-executive independent board is associated with significant contribution and success of a company (Kakabadse et al. , 2001: 7). On the other end, it is argued that there is no significant contribution made so far, hence the premise that “ ‘ Non-executive independent boards are a waste of time.

They have little involvement in a company and are not aware of what is really going on’ It is against this backdrop that this paper seeks to discuss the various reasons for and against the role of the non-executive independent board in a company. It is organized as follows. Next section the 3 gives a brief definition of a key concept. Section 3 presents various reasons for the presence of the non-executive independent board. Section 4 highlight the shortcomings. In the last section 5, the conclusion is drawn. Conceptualization of the Term, Non-Executive Independent Boards There is a paucity of a universally recognized or accepted definition of what constitute Non-executive independent Boards.

However, the present understanding is derived from definitional principles by sovereigns which dictate and elucidate the criteria for defining the subject matter but only in meeting their particular need or circumstance (Iwu-Egwuonwu, 2012:191). This can be attributed to the fact that although independent directors or boards may be ‘ independent’ at least from a legal perspective, the issue of independence in substance maybe but an issue of a different ballgame; the state of Independence is the creation of mind and cannot be codified through a statute.

Some companies may invite people or outsiders whom they are familiar with and whom they expect to be contributing or toe the line without constructive challenge. However, if the non-executive board is one associate with constructive criticism, then the actual independence which at the end of the day is bound to bring success in the company’ s decision making (KPMG, 2011:4). From the definitional criteria given by different region or nation, a working definition of a non-executive independent board is one which is not a representative of a shareowner who has the ability to control or significantly influence the company’ s governance and is not an employee of the firm, or the group, or in any executive capacity for a period of at least three years (Engelbrecht, 2012:126).

In other words, they are boards which are independent in character or judgment and devoid of any material relationship with the business beyond his/her directorship (Iwu-Egwuonwu, 2010:191).

Bibliography

Adams, R. and Ferreira, D. (2009) Women in the boardroom and their impact on governance and performance, Journal of Financial Economics, 94(2), 291-309.

Al-Materi Y.A, Al-Swidi A.K, Bt- Fadzil F H and Al-Materi E M (2012). Board of Directors, Audit Committee Characteristics and Performance of Saudi Arabia Listed Companies, International Review of Management and Marketing, Vol 2(4):241-252

Choi JJ, Park SW, Yoo S (2007). Do Outside Directors Enhance Firm Performance? Evidence from an Emerging Market. J. Financial Quantitative Analysis vol4 (4):941-962.

Deli D, Gillan S, Anderson K (2005). Separation of Powers: Active, Independent Boards Enhance Credibility (Electronic version). Knowledge @W.P. Carey. Retrieved on December 17, 2012, from http://knowledge.wpcarey.asu.edu/article.cfm? articleid=1009

Engelbrecht, M. (2012). The art of shape shifting: facilitating strategic foresight to independent non-executive directors - a strategic approach to corporate governance in SA. Doctor of Philosophy Studies Dissertation at Stellenbosch University.

Fich, E. and Shivdasani, A. (2006) Are busy boards effective monitors? Journal of Finance, 61(2), 689-724.

Horn, R.C. (2005). The legal regulation of corporate governance with reference to international trends. Mini-Dissertation. Bellville: University of Stellenbosch Business School

Independent Commission against Corruption (2008). Good Governance and International Control-A Corruption Prevention Guide for Listed Companies: ICAC, Hong Kong

IOD. 2009. Guidelines and eligibility. [Online] Available: httpp://www.iodsa.co.za/about.asp?CatID=116 Accessed: 17 Dec, 2012

Iwu-Egwuonwu, Ronald Chibuike (2010). Some empirical literature evidence on the effects of independent directors on firm performance, Journal of Economics and International Finance Vol. 2(9): 190-198

Kakabadse, A., Ward, K., Korac-Kakabadse, N. & Bowman, C. (2001). Role and contribution of nonexecutive directors. Journal of Corporate Governance, 1(1), 4–7.PriceWaterhouseCoopers (2002). Being a director: Duties and Responsibilities. Corporate Governance Series, Johannesburg.

King II Report on Corporate Governance in South Africa (2002). Institute of Directors.

KPMG International. (2011). Role of Independent Directors: Issues and Challenges, Audit Committee Institute.

KPMG International. 2007. The audit committee journey: Evolving priorities, practices and perspectives – A global view. Audit Committee Institute

Kumar P, Sivaramakrishnan K (2007). Who Monitors the Monitor? The Effect of Board Indepedence on Executive Compensation and Firm Value (Electronic version). Retrieved January 15, 2010 from http://ssrn.com/abstract-988543.

The Tyson Report on the Recruitment and Development of Non-Executive Directors(2003).A report commissioned by the Department of Trade & Industry following the publication of the Higgs Review of the Role and Effectiveness of Non-Executive Directors in January, London Business School

Weir C, Talavera O and Muravyev A (2008). Performance effects of appointing other firms' executive directors to corporate boards: an analysis of UK firms

Download full paperFile format: .doc, available for editing
Contact Us