Discuss about the Corporate Governance Recommendations.
Organization is operated and owned by two different persons. With the increasing complexity of business and strict legal compliance, each and organization has to appoint non-executive director as per the corporation act 2001. It is evaluated that non-executive directors is considered as independent director who has no pecuniary relation with company. He is deemed to be trustee for the shareholders and has to act in the best interest of shareholders. It is observed that as per the corporation act 2001 it is required by listed company to maintain 1/3 non-executive independent director who will analyze the business functioning of organization (Christensen et al. 2015).
Requirement for appointment of Non- executive directors
- Non-executive director has no pecuniary relation with company and has not been employed in the same company or affiliated company since last three years. There are other several terms and conditions which are given under the Listing agreements and corporation act which should be followed by company to appoint non-executive director.
- The person who gets appointed in the company should not have any relationship with company either in terms of employees, or any other strategic alliance.
It could be inferred that appointment of non-executive director has made mandatory in listed companies with a view to increase the transparency of business functioning. Non- Executive director is appointed in company to curb the unethical business practice and legal compliance in determined approach. However, in board meeting resolution get passed only when the entire non-executive director give their consent (Pugliese, Nicholson & Bezemer, 2015).
Christensen, J., Kent, P., Routledge, J. and Stewart, J., 2015. Do corporate governance recommendations improve the performance and accountability of small listed companies?. Accounting & Finance, 55(1), pp.133-164.
Pugliese, A., Nicholson, G.,and Bezemer, P. J. 2015. An observational analysis of the impact of board dynamics and directors' participation on perceived board effectiveness. British Journal of Management, 26(1), 1-25.