International perspectives on the proper role of the independent director: implications for South African boards of directors

Abstract

Today, boards of directors are being examined as never before for their independence, integrity and effectiveness. The belief seems to be that independent directors will strengthen corporate boards by monitoring the actions of management and ensuring that management decisions are made in the best interest of the shareholders. Independent directors are now expected to make a more formal contribution to corporate governance than before. The importance of good governance is emphasized by both the USA and the UK governments’ call for trustees and fund managers to intervene more proactively in the governance of companies, particularly in the light of dramatic examples of corporate failure such as Enron in the US and Parmalat in Italy where shareholder values have evaporated. Companies failed due to accounting scandals and the inability of the board to control a dominant and powerful chief executive officer. It is thus no secret that investors are looking increasingly to the independent directors on boards to be more effective in protecting their interests.