The Role of Corporate Governance Mechanism of Independent Directors.
In this paper the mechanism of independent directors under the guidelines of Corporate Governance will be analyzed to see how effectively it was designed and how well it has been implemented in the real life.
The mechanism suggests that the Board of Directors should comprise of an equal numbers of executive and non-executive (independent) directors. Executive directors are responsible for the management of the company’s operations whereas the non-executive directors, which are appointed by the shareholders, are responsible for the supervision of the executive directors’ performance as a whole. Under the framework, the independent directors are responsible for setting up board committees, which govern the performance of the board. These committees include audit committee, remuneration committee and nomination committee. The audit committee supervises the reporting of the financial statements between the management and the shareholders of the company, remuneration committee is responsible for devising remuneration packages for the executive directors of the board after considering their performance and the nomination committee is responsible for nominating directors that can become the part of the board after elected by the board of directors. This whole framework is then observed in the real life examples of various organizations in UK, so as to see how effectively the mechanism has been applied and how well it is performing in achieving the main purpose of the framework.