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The Role of Non-Executive Directors

In: Business and Management

Submitted By haffizhusin
Words 1142
Pages 5
THE ROLE OF NON-EXECUTIVE DIRECTORS Essentially the non-executive director's (NED) role is to provide a creative contribution to the board by providing independent oversight and constructive challenge to the executive directors. NED could act as the 10th man in ‘10th man idea’ where his/her role is to disagree no matter how improbable the idea nine people agree on something. He/ She may present a case for an alternative viewpoint — no matter how ridiculous the idea sounds. If his evidence is still inferior and conflicts with the consensus of the other nine men, then they go through with their original plan. If the tenth man’s ideas prove to be superior, they explore his ideas further. Therefore, with NED argument and consultation, the decision that come out from boardroom has been consolidated and unbiased.

The 1992 Cadbury Report initiated a debate about the main functions and responsibilities of non-executive directors. Today, it is widely accepted that non-executive directors have an important contribution to make to the proper running of companies and, therefore, more widely to the economy at large. As the Cadbury Report said, they: “should bring an independent judgement to bear on issues of strategy, performance and resources including key appointments and standards of conduct.” There is no legal distinction between executive and non-executive directors. As a consequence, in the UK unitary board structure, non-executive directors have the same legal duties, responsibilities and potential liabilities as their executive counterparts. Clearly, it is appreciated that non-executive directors cannot give the same continuous attention to the business of the company. However, it is important that they show the same commitment to its success as their executive colleagues. It follows that non-executive directors are subject to the codified duties of...

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