Search results

A revised Combined Code on corporate governance was introduced in the UK in 2003 which set out a number of new provisions relating to the composition of the company's Board of Directors and its main Committees. The Code gives greater prominence to the role of non‐executive directors in a company's corporate governance structures and decision‐making processes. This paper examines the main provisions of the Code relating to non‐executive directors and the emphasis it places on the importance of non‐executives being “independent”.

The paper discusses the main issues concerning the effectiveness of non‐executive directors, drawing in part of the evidence provided by a sample of large UK companies.

Most companies “comply” with the Code's requirements relating to non‐executive directors and endorse the positive contribution they make to Board and Committee work.

Considers the pros and cons of the role of non‐executives and the issue of what constitutes “ independency”.

This is one of the first papers to examine the provisions of the new Code relating to non‐executive directors.

The purpose of this paper is to investigate the extent to which a sample of large UK companies comply with the main provisions of the revised 2003 Combined Code on corporate governance. The new Code incorporates a number of key principles of compliance with regard to the roles of a company's chairperson and chief executive, the composition of its Board of Directors and the composition of the Board's three main committees – the Nominations, Remuneration and Audit Committees. Companies are expected to fully comply with the provisions of the Code or proffer an “acceptable” explanation as to why they have not done so under the Code's “comply or explain” philosophy. The Code gives greater prominence to the role of non‐executive directors in a company's corporate governance structures and decision‐making processes and emphasizes the importance of non‐executive directors being “independent”.

The paper looks at the extent of compliance in respect of the governance provisions referred to above presenting a survey of 50 large UK companies reporting in 2005 drawn (at random) from the FTSE‐250 listing.

A total of 17 companies fully complied throughout their reporting year. Twenty‐two companies took action to comply or proffered “acceptable” explanations as to why not during their reporting year. Eleven companies, however, remained in breach of the Code on one or more counts.

The paper discusses some of the issues which have arisen concerning the effectiveness of non‐executive directors and addresses the controversial matter of what constitutes “independency”.

This is one of the first papers to present an empirical study of the initial impact of the new Code.

This paper aims to examine the relationship between internal corporate governance mechanisms and board performance in monitoring roles.

A survey questionnaire was used to gather data on board performance, while annual reports were employed to gather data on internal corporate governance mechanisms. Data for board performance were based on 112 directors who represent the companies.

Factor analysis extracted two dimensions of monitoring roles: management oversight roles and performance evaluation roles. Non‐independent non‐executive directors and managerial ownership were found to be positively related to both dimensions of monitoring roles, while the multiple directorships of non‐executive directors were negatively related to management oversight roles.

The paper establishes the need for regulators to pay particular attention to multiple directorships, which are commonly practiced in public listed companies. The contribution of non‐independent non‐executive directors rather than independent directors in monitoring roles calls for further research. Regulators need to emphasize the performance evaluation roles of the board of directors (BOD), as much emphasis has been given to management oversight roles.

The study contributes to the literature concerning monitoring roles as it shows that management oversight roles and performance evaluation roles are differentiated. The findings provide an avenue for the contribution of non‐independent non‐executive directors and multiple directorships in monitoring roles.

Aims to consider whether non‐executive directors add value.

A discussion based on current and recent trends in thinking about the role of non‐executive directors.

Considering the effect of the non‐executive director is not quite the same as addressing “the effective non‐executive director”. Do non‐executive directors have any effect and, if so, what are the effects and to what extent? Of course, positive answers to these questions would suggest tests to apply in determining whether someone has what it takes to make an effective contribution as a non‐executive director. This would also assist in determining the scope of the evaluation of the performance of each non‐executive director – which is now very much part of the 2003 Combined Code on Corporate Governance.

This paper offers useful insights into the roles of non‐executive directors.

A number of Committees have been set up in recent years to investigate the governance of UK quoted companies. The key one was the Cadbury Committee, which recommended a number of governance structures as examples of best practice. These included the separation of the posts of CEO and chairman, a significant representation of non‐executive directors, the importance of non‐executive director independence and the setting up of board subcommittees. This study finds that there has been widespread adoption of the recommended governance structures. However, there is no clear relationship between governance structures and corporate performance. This raises questions about the most effective type of governance mechanism and whether or not the prescriptive recommendations of Cadbury should be replaced with a more flexible approach.

I test empirically the hypothesis that the monitoring role of the board of directors depends on the severity of the agency problems and the amount of information needed to monitor. I show that in high growth firms, where the agency conflicts are low and managers are likely to reveal more information to get advice, boards are more independent but less likely to monitor, while in low growth firms, boards are less likely to be independent, but the relationship between firm value and board independence is strong. Overall, boards become more independent but monitor less as firms’ growth opportunities increase, suggesting that managers trade off the amount of information released to the board to get a better advice and to mitigate the monitoring role of the board.

This study examines factors related to audit committee membership for a sample of large New Zealand listed companies. This study reveals that non‐executive directors who are independent, and directors with financial expertise, are more likely to be members of audit committees. The results are consistent with the New Zealand Securities Commission’s corporate governance guidelines for audit committees of New Zealand listed companies. However, in the current New Zealand regulatory environment, directors with accounting expertise can include non‐executives affiliated with the firm. In these situations the financial expert is not independent. Remuneration committee members are found more likely to be members of the audit committee. This may be a result of their power and influence or be due to the skills they bring. The number of years that directors serve on the board, the number of other directorships they hold, and the number of shares they own in the company are not related to audit committee membership.

Examines the role of non‐executive directors. Argues that there is universal agreement on the need for outsiders to be involved in company direction and that shareholders are not able to provide the necessary checks and balances to supervise board activities. Examines research on the system of non‐executive directors. Argues that there is a need to develop procedures to select non‐executives that are rigorous and add value. Concludes that non‐executive directors will have increasing influence on company direction.

In the 1990s various committees (Cadbury, Greenbury, Hempel) reported on governance issues, including the role played by non‐executive directors in promoting “best practice”. Following public concern at cases of “excessive” pay awards to executive directors and financial irregularities the government has recently appointed the Higgs Committee to review again the contribution of non‐executive directors. This paper presents an empirical study of the involvement of non‐executives in large UK companies, assesses the extent to which these companies now “conform” to the recommendations of “best practice” proposed by the earlier committees and looks at the general and specific controversies surrounding the employment of non‐executives as part of companies corporate governance structures.

This study aims to reconcile the contradictory findings of multiple directorships (MD) and its impact on firm performance. The present work incorporates the industry experience of busy directors into the picture and examines its impact on firm performance.

Data are collected for 345 non-financial National Stock Exchange listed firms from Bloomberg, Centre for Monitoring Indian Economy ProwessIQ database and company annual reports from the financial year 2008–2009 to 2017–2018. The industry and year fixed effect panel regression models are used for both business group and non-business group (NBG) firms.

The study reconciled the contradictory findings between MD and the performance of a firm. The results claim that firms having non-executive directors on board with similar industry experience positively influence the firm performance while board having non-executive directors with diverse industry experience establish an adverse relationship. The results are similar for both group affiliated and non-group affiliated firms in India. Further analysis through interaction effect reveals that the presence of more busy outside directors on board irrespective of their industry experience, i.e. similar or diverse, reduces the performance of a NBG affiliated firm.

The findings of the study contribute to the existing literature and tries to establish a strong argument for MD by incorporating industry experience. The present work considers non-financial listed firms, while financial firms and industry experience of outside directors in other emerging economies can be studied to draw additional insights into the existing literature.

Both regulatory bodies and firms should consider the industry experience of non-executive directors for enhancing firm performance.

Existing studies highlight the contradictory arguments for MD and firm performance. The current study incorporates the industry experience of non-executive directors, either in a similar or diverse industry, for the empirical analysis to reconcile the contradictory findings. The present work suggests that a firm should appoint non-executive directors with similar industry experience to enhance firm performance.