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
Wells Fargo BOD 1. In Wells Fargo, there are 20, 17, 15, 16, 16 directors from the fiscal years 2008 to 2012 respectively. We can say that there is a decreasing trend in the size of Wells Fargo’s board of directors, and the annual meeting of stockholders of 2013 will elect 14 directors, which means the number will be further reduced. The board size may affect a firm’s performance, an increase in board membership can bring both advantages and disadvantages to a company. On one hand, larger board…
roles of the board of directors and elaborate on their tasks and responsibilities. We will look into the depths and consequences of the Northern Rock financial scandal in the UK and look at how the regulatory authorities handled this crisis, but also how government intervention and the implementation of the Companies Act 2006 have affected the current financial situation in the UK and how this can help prevent similar crisis and scandals in the future. Board of Directors In large companies…
“Mining giant takes over Fairfax- Editorial independence is lost” Discuss. Gina Rinehart is a mining tycoon. In the 2010s, Rinehart bought a stake in media organizations, becoming the largest shareholder in Fairfax Media and taking a significant share in the Ten Network Holdings. So far, billionaire mining giant Gina Rinehart has made a 49 million dollar investment in the Fairfax Company, which regards her as a valuable investor. She now threatens to abandon the company. Gina Rinehart has holdings…
Shaheen, and John L. Thornton. 3c. How does Ford determine director independence? (P18) A majority of the directors must be independent directors under the NYSE Listed Company rules. The NYSE rules provide that no director can qualify as independent unless the Board affirmatively determines that the director has no material relationship with the listed company. Ford adopts a lot of standards in determining whether or not the director has a material relationship with the Company and these standards…
Institute of Internal Auditors to determine the various relationships, specifically reporting relationships between the internal auditor and those charged with governance. To obtain research about the various types of reporting relationships, independence, conflicts that arise from these relationships and what services are to be provided in the internal audit practice, a survey was conducted where approximately 1600 Chief Audit Executives responded. Results showed that internal audit practice has…
why(In my opinion) In the Health South’s scandal, every links of the corporate management, especially the administration section, the board of directors and certified public accountant show up a serious offense. In the Health South 's scandal, every links of the corporate management, especially the administration section, the board of directors and certified public accountant show up a serious offense, which is the reason why Health South can pass through the forecast which come from Wall Street…
are questioning why many directors and Co-CEO’s hold ‘significant’ board level titles. As the committee of independent directors, we have been tasked with the mandate to study the company’s structure, the merits of a lead director versus a chair and what changes, if any, should be made to the company’s board structure and governance as a result of this. As a committee of independent directors, after studying the company’s organization and roles of its Board of Directors, we have identified three…
and specifically focuses on agency relationships between shareholders and directors in the development of the UK statutory audit. However, this simple model of the role of audit, depicted through agency theory, is complicated by other factors, which are highlighted in this paper. For example, auditors are also agents of principals, which can lead to further concerns about trust, threats to objectivity and independence and an ongoing need to find further mechanisms such as regulation to align…
financial statements? 7 What is a review of financial statements? 7 Relationships in financial reporting 7 The auditor’s report 8 Modified auditor’s reports 9 How can you tell if the auditor’s report is clean or not? 9 What is auditor independence? 10 What do auditors and reviewers do? 11 What does materiality mean? 12 What do auditors do in regard to fraud? 12 What do auditors do in regard to going concern? 12 Does a clean auditor’s report mean a clean bill of health for…
management, shareholders and other stakeholders. Issues involving corporate governance include Internal controls and internal auditors Independence of external auditors and quality of their audit Oversight and management of risk Oversight of the preparation of financial statements Review of compensation agreements with senior executives Resources available to directors to carry out their duties Nomination of individuals for positions on the board. What went wrong? Executive compensation grossly disproportionate…
