The independent director and effective corporate governance

Iwe, Chizaboda

The independent director and effective corporate governance

Master Thesis

2014-07-30

Publisher

University of Cape Town

Department

Department of Commercial Law

Faculty

Faculty of Law

Abstract

As a response to the rash of scandals in particularly USA and Europe in recent times, corporate governance has elicited a lot of interest worldwide. Today there is growing dialogue among the different stakeholders about corporate governance and how it should evolve to cope with the increasingly dynamic and global nature of our capital markets. Worldwide, corporate reforms and other initiatives are being taken as remedies to rebuild trust in corporate governance. Corporate reforms have led to the introduction in many countries of various codes or guidelines for best practices in corporate governance. Until now, probably the most important basic ingredient of these reform initiatives has been the emergence of the 'independent director'. The introduction of this concept of independent director is at the heart and soul of corporate governance. Although the relevance or otherwise of this class of director to corporate success has been the subject of robust discourse, it is generally accepted that a 'lack of monitoring by independent, disinterested non-executive directors has been a major cause for the various corporate scandals that we have witnessed'. The first section of this study attempts a comparative analysis of various definitions (taken from corporate governance codes of various countries) of the independent director, taking a look at his role within the corporate structure. The second part examines the rationale for including the viii viii independent director on the board, his effectiveness, and his relevance in relation to corporate performance.

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