Director Independence Essay

Submitted By ksen6048
Words: 350
Pages: 2

Independence
Non-executive directors need to be independent not only of management, but also of any business or other relationship that could interfere with, or be perceived to interfere with, the exercise of independent judgement.
When determining the independent status of a director, the board should consider the following:
1. Is the director a substantial shareholder of the company, or an officer of (or otherwise associated directly with) a substantial shareholder of the company?
2. Is the director employed (or have they been employed within the last three years) in an executive capacity by the company or another group member?
3. Within the last three years, has the director been a principal of a material professional advisor or consultant to the company or another group member?
4. Is the director a material supplier or customer of the company or other group member; or an officer of, or otherwise associated, directly or indirectly, with a material supplier or customer?
5. Does the director have a material contractual relationship with the company or another group member, other than as a director?
(Australian Securities Exchange Corporate Governance Council, 2010)
Note that all of the guidance on what makes a director ‘independent’ concerns not just fact, but also perception. It is not only important that directors are independent in form, but also that an outsider looking in perceives the directors to be independent

Indeed, there are flaws in the non-executive director…