Composition and Role of Board of Directors

 
 

"There is a whole spectrum of skills and knowledge which [directors] might want....... Company should provide disclosure of what they are doing in directorship. There should be a clear expectation on directors. They should be satisfied in their own minds that they are independent. They can fulfill their duties to which they are taking responsibilities."

Mr Charles Grieve
Director of Corporate Finance Division
The Securities and Futures Commission
 
Summary of views:
 

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A board consisting of friends and relatives may achieve smoother cooperation and share common goals. Yet, the connection may jeopardise the board's credibility. There should be checks and balances governing the board. For example, to strike a balance, the board should consist of both professionals and Independent Non-executive Directors (INEDs) who can render more effective monitoring of the company.
 

 
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In the case study, the INEDs did not fulfill their duties well as they did not pursue on the questions raised about the loosening of credit policy and reduction in production costs in the audit committee meeting.
 

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In Hong Kong, there is no regulation governing the number of directorship one can take up. It is thus not uncommon for an individual to be INEDs of a number of companies. In the case study, Matthew Ip was also in a dilemma of sitting on 15 boards. Some opined that if an individual had busy schedule, he might not invest sufficient time and energy to perform the role of INEDs well. Some commented this rested with the individual as it was a matter of personal discipline. The Listing Rules issued by the Hong Kong Exchanges and Clearing Ltd. do not attempt to identify each and every circumstance whether an individual is independent or not. Yet, the Rules set out guidelines to assist listed companies in assessing the independence of INEDs. In all circumstances, directors should beware of their fiduciary duties and to avoid conflict of interest while being INEDs of multiple companies.
   
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Indeed, discharging basic responsibilities is only the bottom line directors should meet. They should also assume the role of promoting integrity management from the top to nurture an ethical corporate culture.