Corporate Governance Positions: The Board:
Board Independence
Board Independence
Position: Company boards should have an independent majority.
Rationale: An independent majority on the board is more likely to consider the best interests of shareowners first. It also is likely to foster independent decision-making and to mitigate conflicts of interest that may arise.
Where stated: CAC - CSA CG Proposals
Insiders as Independent Directors
Position: Current and former executives and directors of an issuer should not be permitted to sit as an independent non-executive directors until five years after leaving the relevant positions, and then only under certain restrictions.
Rationale: Insiders such as individuals from these groups can retain emotional, financial, professional, and personal ties to the issuer, its executives, and its directors that could cause the insider to decide on matters in a manner that serves the interests of others besides shareowners.
Where stated: APAC - HKEx Listing Rules on CG
Independent Director’s Connection to the Company
Position: Independent non-executive directors should not have been connected to a director, chief executive, or substantial shareowner of the issuer within the preceding five years.
Rationale: Individuals with such links to insiders are more likely to make decisions on the basis of those links than on what is best for shareowners. After five years, the allegiance may diminish to a point where the independent, non-executive director may make decisions that run counter to the interests of the insider.
Where stated: APAC - HKEx Listing Rules on CG
Lead Independent Director
Position: Independent board members should appoint a lead director whose role is to chair separate meetings of independent directors and address other issues that may involve conflicts with management.
Rationale: This approach strikes an appropriate balance for ensuring the continued independence of board deliberation and decision-making processes.
Where stated: CAC - CSA CG Proposals
Independent Directors’ Meetings
Position: Independent board members should schedule meetings and meet separately from management and other executive board members and disclose to shareowners the number of such meetings held each year.
Rationale: Separate meetings will foster a more open consideration of issues that may not arise during meetings with executive board members present.
Where stated: CAC - CSA CG Proposals
Non-Shareowner Employees on the Board
Position: Companies and regulators should not create mechanisms that encourage non-shareowner employee participation on company supervisory boards.
Rationale: Individuals from non-shareowner groups often have agendas that run counter to the board’s role of working for the best interests of shareowners.
Where stated: CG TF - OECD CG Principles