Independent Directors

How will the presence of independent directors affect family business performance? This question is still theoretically debated and empirically inconclusive. Because family businesses are a group of heterogeneous companies with different levels of family involvement in the business, the purpose of this paper is to empirically explore how the combination of different family business governance structures jointly shape the effect of independent directors on family business performance in an understudied Collectivist cultural setting. Using Qualitative Comparative Analysis (QCA) on a sample of 74 Lebanese family firms this study finds that, depending on the family firm governance structure, the presence of independent directors on the board can lead to either positive or negative firm performance. Theoretical and practical implications are discussed.

Corporate Governance refers to the governance or regulation of companies or corporate entities. It facilitates a smooth and an efficient functioning of a company by maintaining transparency in the overall regulatory framework of the company. It also looks after the rights and interests of its members. Corporate governance takes the centre-stage, especially in today's age, where the corporate sector is a victim of several frauds and malpractices. This article will

Purpose: The present study endeavors to analyse the challenges independent director encounters in policing managerial conflicts of interest and in monitoring the maximization of shareholder wealth. In addition, the study ascertains the size and composition of boards and attempts to understand its relationship with financial performance.

Design/methodology/approach: The nature of the present research primarily lends itself to a qualitative research methodology including men and women directors on boards. The processes that we sought to study were unknown at the commencement of the research. Hence, important issues, themes, and variables were to be discovered through an emergent form of research. Further, we empirically examine the impact of independent director on financial performance using multivariate regression model for 500 large listed Indian firms.

Findings: The finding identifies the inherent challenges faced by independent directors and suggests the relationship between presence of independent director and financial performance in Indian firms.

Emerging policy lessons: Corporate governance reforms mandated in India like independent directors on board are considered a better monitoring function. However, this internal governance mechanism needs more focus on actual value contributing to the purpose. Busy independent directors are not fully committed to the companies where they serve. Independent directors add value whereas larger board size reduces the monitoring function of directors leading to reduction of firm’s value.

Keywords: Board Independence, Corporate Governance, Independent director challenges, India

JEL Classification: G32, G34

There are questions that directors and boards should ask about the relevance and contribution of contemporary corporate governance arrangements, codes and practices in the light of changing contexts, new priorities, emerging trends and developments and the diversity of situations that companies can find themselves in at different stages of development. There are also issues to consider if boards are to be more creative in how they operate and more ambitious in terms of the value they can add. Would directors and boards make better or worse decisions, or be more or less effective, if they felt free to adopt the governance arrangements that best enabled them to achieve corporate aspirations, and had greater flexibility to evolve them as circumstances changed and as an enterprise grew? The article considers emerging requirements for more strategic boards and shared leadership, ethical perspectives and risk oversight, the value of independent directors, ensuring independent judgement, deploying enabling technologies and the provision of leadership in the contemporary business context to encourage thinking ahead of the 2018 London Global Convention on Corporate Governance and Sustainability.

Published as: Coulson-Thomas, Colin (2018), The Future of Corporate Governance, Director Today, Vol. 4 Issue IX, pp 5-8

Multiple directorships are found to be common among outside directors (KPMG, 2009).  The fact that these directors are busy and may lack the time to carry out their duties effectively and efficiently initiated the issuance of a requirement under the Bursa Malaysia Listing Requirements to limit the number of directorships held by an individual director to five (BM, 2012). Previous literature however, does not show robust findings concerning the ineffectiveness of these directors in performing their role. Using samples of Main Market Bursa Malaysia firms, this study aims to examine the impact of multiple directorships and diligence on firm performance and investigate the presence of moderating effect of diligence especially in the context of Malaysia. Multiple directorships are measured by the number of outside directorships held by independent directors and diligence is measured by the number of board meeting attendance of independent directors. Two theories are employed in this study which is agency theory and resource dependence theory. The results revealed that a higher number of multiple directorships results in higher firm performance, and no significant relationship is found between diligence and firm performance. Besides, the results also showed that the attendance at board meetings of independent directors with multiple directorships does not add value to firms.

Malaysia's Labour Force Participation Rate is at 67.8 % in June 2017 with the female labor participation rate at 54.3%. The target of Malaysia is to have women's representation of 30% in senior decision-making positions and on boards by 2016 as to accelerate the development of high-potential women leaders in the labour market and in decision-making positions across all industry sectors and business functions. Malaysia has achieved 10.7% across all public listed companies and 14% for the Top 100 companies by market capitalisation according to Bursa Malaysia. The purpose of this paper is to look at various facets of corporate governance, notably the effectiveness of boards of directors and the composition of boards. In this context, the current study gauges the effects of women directors regarding firm performance issues and the benefits of female representation on boards. The research purpose is to examine the effect of board gender diversity and independence on firm performance in Malaysia's listed companies in consumer products and properties sectors covering a 5-year period from 2011 to 2015. This study also examines number of female and directors affecting the firm performance in terms of Return on Asset (ROA) and Return on Equity (ROE) specifically in two sectors which is consumer products and properties. Quantitative data was collected from the Bloomberg website and annual reports of the public listed companies in Bursa Malaysia. The findings may provide some implications for future research regarding the effectiveness of board of directors towards firm performance. Nevertheless, the finding may not reflect the true picture since the percentage of female directors quite constant in Malaysia. It is recommended to promote gender equality in terms of recruiting women into the corporate board and increase the participation of women in the labor force.

As awareness grows of the likely consequences of current activities and lifestyles, aspirations, expectations and priorities are changing. The 31st World Congress on Leadership for Excellence and Innovation provides a platform for the review and rethink of board leadership and the relevance and role of excellence and innovation in relation to contemporary challenges and related opportunities. This Theme Paper raises questions for participants and directors and boards more generally to consider in relation to the event’s agenda and areas that could be covered, including corporate board leadership in challenging times; board diversity, independent directors and business excellence; legislative and compliance driven principled corporate governance; business excellence and creating a world class organisation; innovation purpose and priorities; fostering disruptive innovation in a digital economy; recognising limits to excellence and innovation; and excellence and innovation in a family owned business. Whether or not an individual company is excellent and/or innovative may be less important than whether a community or society is, and whether we have the individual and collective will and drive to question, think and act in pursuit of responsible, inclusive and sustainable activities, lifestyles and outcomes for us and the natural world. The World Congress on Leadership for Excellence and Innovation is organised by India’s Institute of Directors.

Purpose-This study aims to understand whether board diversity has a direct effect on ''corporate social responsibility (CSR)'' performance of companies or not. In addition, this study also aims to examine the moderation effect of age and education level of female board members on the relationship between board gender diversity and CSR performance. Design/methodology/approach-A ''corporate social performance (CSP)'' measurement instrument was designed to conduct a content analysis that analyzes the CSR disclosure in the annual reports of Turkish companies listed on the ''500 biggest Turkish companies'' report of ''Istanbul Chamber of Industry (ISO)'' in 2015. The data coming from content analysis of 117 company reports were analyzed by using hierarchical regression analysis. Findings-Despite of supporting the increase in CSR performance when there is a greater presence of independent board members in an organization, evidence supports that ratios of female and foreign board members do not have any significant effect on CSR performance. Originality/value-The study contributes to previous literature on board diversity and CSR performance as follows. First, this paper contributes to previous literature by examining and testing independent, female and foreign board members as a new antecedent of CSR performance in research on Turkey; second, by examining a sample of the ''500 biggest Turkish companies'' and providing some tips about both Turkey and other developing countries; third, by reopening the debate about the positive impact of a greater presence of independent directors on board on CSR performance and the non-effect of female and foreign board members. Finally, it also offers a partially new CSP measurement instrument based on content analysis.

The collective effectiveness of boardroom teams cannot be assumed and has to be worked at. Boards operate in a business environment of change, uncertainty and insecurity. They are simultaneously confronted with multiple and inter-related challenges and new and unprecedented opportunities. The issues faced by many boards have also become more complex and may have a variety of short, medium and long-term impacts for many corporate activities and, in some cases, most stakeholder groups. They may require collective responses and have implications for how boards operate, governance arrangements and the motivation of directors who feel “out of their depth” and worry whether they are still relevant.

Reducing agency costs is the principal problem of corporate governance. Although the scope and stringency of the laws and rules on eliminating agency costs are expanding, there is still need for the understanding of the supervision and enforcement of these rules. Enforcement can take the forms of public and/or private. With dispersed and concentrated ownership patterns, the relevance of public and private enforcement mechanism may differ; due to the appearance of agency problems unlikely.
The purpose of this paper is to provide a conceptual analysis on corporate governance strategies involving the exercise of control rights, the appointment of independent directors, auditing, and disclosure. This paper will also include a guideline on the enforcement mechanism in Turkey and the ways in which they are used to control the agency problems; between owners and managers, controlling shareholders and non-controlling shareholders or creditors.

The study sought to examine the impact of independent directors on dividend policies of non-financial companies in Sri Lanka. The study was obtained panel data from annual reports of listed ninety six non-financial companies over the periods 2011-2015. A fixed effect panel regression model was selected to examine the objectives of the study. The findings revealed that when the board has independent directors at least two or one third of total directors, non-financial companies increase dividend payments with increase of net earnings, total assets and previous year's dividend payments or vice versa. No significant impact of leverage on dividend policies of non-financial companies in Sri Lanka. The results were consistent with agency theory, steward theory and signaling theory while the results were supported to align the conflict of interest between shareholders and managers and signaling to stakeholders. The findings are useful to management body to understand the corporate governance quality status, policy makers and regulators to strictly follow up or enhance the guideline of board independence of non-financial companies, and investors to select the best suit stocks in building their portfolio.

There are a variety of areas that should be considered when assessing candidates for a board appointment or when contemplating an initial or further directorship. There are also various questions that nomination committees and potential appointees should ask. Assessing suitability for an independent non-executive director (NED) role, whether from the perspective of those seeking to strengthen a board or that of a candidate, raises a number of issues. Areas to explore include the rationale for an appointment, prioritizing director candidate requirements, establishing future requirements, directorial independence and entrepreneurship, providing challenge and responsible corporate direction, directorial opportunities and assessing possible directorial roles, establishing focus and realistic search objectives, aligning perspectives and being patient and persistent. People from a variety of backgrounds can make good independent NEDs, but many companies still look among the ‘usual suspects’ rather than widen the gene pool and consider a greater diversity of candidates that might bring new perspectives to the boardroom.

In the corporate format of business organizations, the position of the board as a company's supreme body, subject only to the laws of the land has long been well established. It is vested with every power required to achieve on behalf of its shareholders optimal wealth on an ongoing basis and in return is held accountable only to its shareholders who theoretically appoint or elect them. The only constraints on board authority are those imposed by law and the company's own charter documents such as the Articles of Association in terms of processes and the Memorandum of Association in terms of business objectives it can engage in. Why then is it that a large number of boards do not succeed in fulfilling this trusteeship assignment and yet continue sanguinely in their insulated and exalted retreats? This paper seeks to ascertain some of the key issues that permit and encourage this self-perpetuating institution of corporate boards and ventures to suggest some enablers to shake them out of their indolence and get effective in the discharge of their onerous responsibilities.

Purpose The purpose of this paper is to examine the effect of the presence of independent board directors on financial performance in India. Design/methodology/approach This study used panel regression models on large listed Indian firms to investigate the impact on financial performance owing to the presence of independent directors. Findings The findings suggest that independent board directors in Indian contexts do not significantly affect financial performance. Practical implications This study has implications for the formulation of regulation related to appointment of independent directors and the extent of their representation on the board for them to be effective. Social implications The proportion of independent directors on the board of the firm is influenced by the trade-off between the cost of having independent directors on the board versus the benefits to the firm and society. Originality/value The impact of the presence of an independent director on financial performa...

The life of the law, especially with regard to corporations, is strongly influenced by experience and practice. The board, a living element of corporate law, is therefore one of the most noteworthy aspects to be studied, given its relevant implications and role as the lifeblood of scholarly debates. This Article offers a novel contribution to the assessment of list voting, a fairly unique Italian system that has been increasingly appreciated by institutional investors. A hand-picked dataset that stretches from 2005 to 2015 shows a positive correlation between minority-appointed directors in the boardroom and dividend payouts. Furthermore, the findings shed light on the practice of appointing independent directors based on slates proposed by the minority of shareholders and provide evidence that list voting works, not only in closely-held corporations, but also on a global scale, despite the previous scholarship that argues that list voting makes more sense in concentrated ownership scenarios. Although the empirical analysis focuses on the Italian case, the insight gained in this analysis regarding the effectiveness of list voting is also useful for other jurisdictions.

This study links the phenomenal collapses of Nigerian banks between 1994 and 2010 to
the apparent absence of truly independent boards of directors to provide adequate
oversight of the activities of the management for the ultimate benefit of all the
stakeholders. Three research questions were raised and addressed through analyses of
data collected through questionnaire, interview, focus group discussion and relevant
banking industry documents. Thus, a blend of qualitative and quantitative research
methodologies was used to address the problem in the study. Requisite consents and
ethical clearances were duly obtained prior to collection of the data used in the study.
The analyses of the data revealed that although there is currently no independent board in
the banking industry, such boards will more likely than non-independent boards
contribute to better shareholder wealth, corporate growth and longevity. Furthermore, the
weakness of corporate governance that led to the massive failures was characterised by
overbearing and powerful CEO/board chairs and their highly dependent co-directors who
had more personal than corporate interests to protect.
Based on these findings, some recommendations were proffered. Essentially, the number
of independent directors required for banks should be reviewed upwards by regulators
and implemented by the banks to give vent to the clamour for bank board independence.
Independent directors should be trained and developed while the need for them is
embraced and promoted by society leaders since cultural/normative values heavily bear
on compliance with principles.

This study links the phenomenal collapses of Nigerian banks between 1994 and 2010 to the apparent absence of truly independent boards of directors to provide adequate oversight of the activities of the management for the ultimate benefit of all the stakeholders. Three research questions were raised and addressed through analyses of data collected through questionnaire, interview, focus group discussion and relevant banking industry documents. Thus, a blend of qualitative and quantitative research methodologies was used to address the problem in the study. Requisite consents and ethical clearances were duly obtained prior to collection of the data used in the study. The analyses of the data revealed that although there is currently no independent board in the banking industry, such boards will more likely than non-independent boards contribute to better shareholder wealth, corporate growth and longevity. Furthermore, the weakness of corporate governance that led to the massive failur...

There are a variety of questions that directors can and should ask about the contribution, relevance and state of contemporary corporate governance who should be involved in shared leadership and by what means, ethical perspectives and corporate culture, steps that boards can take to build trust with business, companies and capitalism, risk oversight and governance, the contribution of independent directors, ensuring and supporting independent judgement, sustainability, resilience and enabling technologies, whether a single or multiple approaches are desirable, and the way ahead. Diversity may be preferable to convergence,

Is it incumbent upon all those who feel that business and many companies need to become more responsible and sustainable, to speak up within whatever stakeholder groups they belong to and advocate change? As citizens and directors, should we look at outcomes being sought from regulations, laws and codes and consider what we can do to bring them about, either individually or collectively, through influencing and working with our peers?

This paper is designed to encourage questioning and thought ahead of the 2018 and 18th London Global Convention on Corporate Governance and Sustainability. Published as: Coulson-Thomas, Colin (2018), Board’s Transformational Strategy for Building a Sustainability Paradigm (Theme paper for 18th London Global Convention on Corporate Governance and Sustainability) [http://iodglobal.com/images/lgc2018/theme-paper-lgc-2018.pdf, posted 3rd August]

This paper presents several theories to achieve a better understanding of corporate governance structures and their operations in a two-tier-board corporate governance structure. The author also analyses transitional economies using the case of Vietnam. The author investigates the influence of independent directors upon the probability of CEO turnover as well as the sensitivity of the link between performance and turnover. The findings show that non-executive directors are not always independent. At the same time, independent directors have a vital role to play in making decisions concerning CEO dismissal. These directors also reduce the effects of CEO ownership and CEO duality upon the probability of CEO turnover. In summation, the research found that performance and CEO age constitute key factors in CEO turnover, regardless of the corporation or board size.

This paper attempts to examine the efficacy of the presence of independent board directors on financial performance in India.The study utilised panel regression models on large listed Indian firms to investigate the impact on financial performance due to the presence of independent directors.The findings suggest that independent board directors in Indian contexts do not significantly affect financial performance.The study has implications for the formulation of regulation related to appointment of independent directors and the extent of their representation on the board for them to be effective. The proportion of independent directors on the board of the firm is influenced by the trade-off between the cost of having independent directors on the board versus the benefits to the firm and society. Impact of independent director on financial performance in highly concentrated ownership remains ambiguous

This aim of the study corporate governance is a structure used to manage and direct the affairs of the corporate company in order to enhance its business prosperity and accountability with objective of achieving long term shareholder value in addition to taking the interests of other stakeholders into account. The purpose of the study to critically examine the mode of appointment of independent directors to boards under the companies Act 2013 and study the board culture. The main objectives of the study evaluate the functioning characteristics of independent directors by the socioeconomic characteristics of corporate stakeholders of public limited companies in Mumbai, Andheri region, ethical leadership quality of the independent investor's perception of the public limited companies. The present study comprises of both primary and secondary data. The Primary data is collected by conducting questionnaire based survey among the population of corporate investors of Public Limited Company in Andheri Region of Mumbai. The snowball sampling technique is used to select the sample respondents from the investor's population. The size of investors sample is fixed at 400. The statistical tools were used analyses percentage analysis, Correlation and ANNOVA. The concluded of the study the investors, it was understood that the independent directors were better in understanding of their role & responsibilities, worked well with others, possessed required business / industry knowledge, made available themselves when need, attended the board meetings regularly, devoted time to oversee company affairs, always alert and inquisitive, never hesitated to ask hard questions in board meeting, challenged management assumptions and had clear understanding of role & responsibilities of the board.

In uncertain and changing times, and as and when disruptive developments occur, encouraging challenge and the questioning of managers, leaders, visions, missions, goals, objectives, strategies, business models, roles, rules, policies, practices, priorities, standards, guidelines and approaches can be highly desirable and essential for innovation and good governance, and if people and organisations are to adapt and remain current and relevant. Boards and decision makers should seek objective, balanced and, where appropriate, independent advice. They should identify relevant and up-to-date inputs, avoid and/or tackle unfettered power, groupthink and vested interests and ensure a diversity of skills, perspectives and viewpoints.

Published as: Coulson-Thomas, Colin (2017), Questioning management and encouraging challenge, Management Services, Vol. 61 No. 4, Winter, pp 44-47

An overview of current issues and questions for directors and boards in relation to governance and sustainability. Explores the consequences, implications and relevance of contemporary approaches and possible future scenarios. Published in a book of papers to coincide with the 16th London Global Convention on Governance and Sustainability as: Coulson-Thomas, Colin (2016), Governance, Sustainability and Contemporary Boards, in Ahluwalia J. S. (Editor), Boards Evolving Role in an uncertain Global Economy, London, IOD Publishing, 15th October, pp 54-65 [ISBN: 978-81-932503-9-6]

Purpose The purpose of this paper is to examine the effect of the presence of independent board directors on financial performance in India. Design/methodology/approach This study used panel regression models on large listed Indian firms to investigate the impact on financial performance owing to the presence of independent directors. Findings The findings suggest that independent board directors in Indian contexts do not significantly affect financial performance. Practical implications This study has implications for the formulation of regulation related to appointment of independent directors and the extent of their representation on the board for them to be effective. Social implications The proportion of independent directors on the board of the firm is influenced by the trade-off between the cost of having independent directors on the board versus the benefits to the firm and society. Originality/value The impact of the presence of an independent director on financial performa...

This paper examines the level and determinants (i.e. ownership structure, board composition and audit committee presence) of voluntary corporate disclosure in the annual reports of the largest 100 companies listed on the Egyptian stock exchange (EGX). Our results indicate that overall voluntary disclosure was low at just 13.43% with a large variation range.

This score places Egypt at a lower level than other emerging capital markets (e.g. Singapore, Hong Kong and Malaysia). The variances of these results support the need for individual country level studies and comparative analysis.

Multivariate results show audit committee presence as the most significant variable influencing voluntary disclosure. Also, companies with a higher ratio of independent non-executive directors have a higher extent of voluntary disclosure. It was also evidenced that voluntary disclosure increases with decreases in block-holder ownership. Results show that two other ownership aspects – managerial and government – are not related to voluntary disclosure. Finally, the analysis shows profitability and internationality significantly impact voluntary disclosure.

On the other side, that number of shareholders, type of auditor, size, liquidity, leverage and industry type of the firm do not affect the extent of voluntary disclosure.