Hi Sandune,Why?According to the critics, Directors:1)should not...

Hi Sandune,

Why?

According to the critics, Directors:
1)
should not be paid Director's Fees (most non-execs are paid $40K (or less) per annum for their efforts, not counting Chairs, or deputy Chairs);
2)
should not be offered "free" (or incentive based) shares;
3)
once acquired (or issued) should not be permitted to sell their shares (even though, in doing so, they are subject to more stringent requirements thans the rest of us, based on disclosure requirements, black-out periods, insider trading, etc);
4)
once appointed, should be required to devote most (if not, all) of their time to each of the companies that they are appointed to;
5)
should be punished severely in the event of anything going wrong (even though a company is a legal fiction embodying a group of people, on a dedicated basis, working towards a common outcome);
6)
should have their assets on the line (at risk) to back-up their involvement in each company; and
7)
should be seen, villified, or attacked with impunity in the media, on the BBs, or more generally out there in the public arena without the sanction or benefit of relative anonymity, as most of the rest of us enjoy.

Directors are now well and truly a hated breed, but they have also been caught up by the maelstrom that has enveloped our capital markets over these last few years.

Simply put, the rules of corporate governance and disclosure need to be rigidly monitored, boosted where required, and adhered to in practice.

The rules governing the purchase or sale of listed securities needs to be made more transparent than what it already is.

Consideration also needs to be given to developing the hybrid Board concept, whereby 2 actual Boards would exist.

The first would be populated by executive management (ie: typically, the 3 -5 most senior personnel in the Company), plus 2 -3 Board members (ie: Chair, deputy Chair and a 3rd Director, or Chair +2). This would become the Executive Management Advisory Board and would represent a halfway house between the internal management grouping, and the external Board.

Decisions of the EMAB would be taken on the following basis:
1)
where pursuant to Board delegation, in accordance with relevant delegations of authority; and
2)
otherwise, upstreaming for recommendation /ratification of the external Board.

The external Board would then be populated by ~7 members, no more than 3 of which could be related to the Company in either an executive, or a shareholder, capacity.

Typically, then, you would have the CEO /MD as a Board member, and 1 -2 shareholder members.

A majority of the Board, however, would need to be comprised of independent members with no association with the Company, either in terms of management /employment, or in terms of shareholder representation.

These independent members would be remunerated in accordance with benchmarked criteria which would be publicly sourced via the ASX /regulators and assembsled according to peer review (ie: akin to a Remuneration tribunal approach, but otherwise, not as politicised).

These same independent members would also be awarded shares /options from out of a performance pool.

Once issued, these shares /options would need to satisfy certain performance hurdles (typically, in terms of elapsed years of service). They would not vest, however, until after the Directors' in question had left the Company (ie: no share trading whilst a Director, etc).

Alternatively to this, Directors would be matched certain performance rights which would mirror the performance of their companies (ie: they would share some of the windfall gains in shareholder value, etc, that accrued during their time as a Director) whilst reverting to their baseline fees in the event of a declining share price.

Clearly, the systems of accountability, management and reward need to be radically overhauled in order to entice qualified and competent individuals to nominate themselves for directorships (etc).

The current system is skewed in favour of executive owners of the business, or in favour of executive management. And, as has become the case with at least one retailer out there, questions of alleged integrity, alleged conflict, alleged management and alleged governance are all being faught out in a somewhat ugly public display of apparent Board /management disunity.

In other words, we may well criticse Directors for all that they do. But similarly, we never want to compensate /equip them adequately enough to carry out their roles in the appropriate manner (ie: to the extent that we would like them to).

As for a group of publicly castrated individuals, Directors appear to be ranked even more highly (ie: in terms of publicly visibility, criticsim, impact, etc) than our own politicians. Strange, that!!!