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The position of non-executive director - Essay Example

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This research presents the position of non-executive director. The research describes functions of non-executive director, dispersed and concentrated ownership, non-executive director’s role for dispersed and concentrated ownership and usefulness of non-executive director…
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The position of non-executive director
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Download file to see previous pages The researcher of the current paper states that there is no distinction made between the responsibilities of a non-executive director and an affiliated director. According the United Kingdom company law, however, both have distinct roles while fulfilling their responsibilities. The affiliated director is an employee of a company and is given an executive position and authority to involve in the day to day business operations of the company; on the other hand, the non-executive director is not an employee of the company; consequently, he or she does not possess an executive position or executive authority similar to the executive position or executive authority extended to the affiliated director. In addition to that, the affiliated director receives salary or remuneration for his or her services performed for the company; on the other hand, the non-executive director charges fees for providing his services for the board. Fundamentally, the functions of the non-executive directors are to provide a creative contribution to the board with the provision of objective criticism. Also, the non-executive directors are required to ponder over the board matters and avoid straying into the executive direction, which is the role of the affiliated directors. And, at the same time, the affiliated directors involve and carry out the executive decisions for the company on day to day basis in contrast to the function of the non-executive director. ...
Consequently, the Sarbanes-Oxley 2002, in the United States, and Higgs Review of Non-Executive Directors in 2003, in the United Kingdom, revitalized the role of the non-executive director and gave more clarity to the participation and contribution of the non-executive director. Dispersed and concentrated ownership Particularly, in the United States and the United Kingdom, the dispersed ownership, which is also identified with the term “outsider systems” (Maher and Andersson, 1999), is featured with relatively high turnover along with widely dispersed share ownership; in the dispersed ownership, a more equitable distribution of information and a considerable emphasis is given to the protection of the shareholders rights and, especially, those of minority investors. On the other hand, concentrated ownership, also known as insider systems, have features such as the presence of ownership concentration or concentration of voting power in a few hands along with a multiplicity of corporate holdings and inter-firm relationships. The specific examples, denoting the concept of concentrated ownership, include familial control, banks, holding companies and other non-financial institutions. Both types of ownerships offer different sorts of advantages. The dispersed ownership provides the benefits such as extended liquidity of stock; as a result, the investors can easily avail the better risk diversification possibilities; and, at the same time, the corporate governance framework in the dispersed ownership encourages the use of public capital markets (OECD, 1999); on the other hand, the problems such as supervision and monitoring of management, which remains to be a point of high tension in ...Download file to see next pagesRead More
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