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  • Essay / Effectiveness of non-executive directors - 1025

    The effectiveness of non-executive directors is increasingly seen as essential in contributing to the effectiveness of corporate governance in protecting investors. Relevant situational and sectoral experience enhances the effectiveness of non-executive directors. non-executive directors. Jebb (1998), cited in Ahwireng-Obeng, Mariano and Viedge (2005), suggests that it is best to hire non-executive directors with experience in similar sectors and situations as well as others to which the company is likely to face rather than seek non-executive directors. for particular expertise in a director. According to Pincombe (2000), this allows for the use of specialized skills in different areas and broadens experience (Ahwireng-Obeng, Mariano and Viedge, 2005). To some extent, seniority also impacts the effectiveness of non-executive directors. Feldman (1992) believes that a board of directors that serves a company well today may not be qualified to lead it in five years, as markets and products evolve. Therefore, appointments of non-executive directors should be for a specific duration and new members should be appointed as necessary. One suggestion is that by serving for more than ten years, the board member tends to become too close to senior management to provide objective oversight (Ahwireng-Obeng, Mariano, & Viedge, 2005). However, it could provide in-depth knowledge and institutional memory that a new board member must work hard to acquire (Fleming, 1998 cited in Ahwireng-Obeng, Mariano and Viedge, 2005). As for selection and appointment, “good boards don’t just “happen”; they are carefully constituted work teams” (Vennat, 1995). In other words, it is by selecting and developing appropriate persons ......middle of paper ......m their functions, including those serving irregularly on the Nominations Committee, the Remuneration and the Audit Committee, meeting only a few times a year (Pass, 2008). Due to limited involvement time, non-executive directors might be too “removed” from internal decision-making processes to provide effective input and lack of information. The effectiveness of non-executive directors would be compromised if they are not informed of the challenges they face. Hurley (2000), cited in Ahwireng-Obeng, Mariano and Viedge (2005), suggests that making the following list of information accessible to non-executive directors can contribute to their focus and productivity: board policies administration, committee directives, board minutes, authority annotations, contract summaries, organizational charts, member surveys and analysis, and program or project analysis.