All virtue is summed up in dealing justly - Aristotle
Untitled - Zicklin School of Business
Untitled - Zicklin School of Business
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Independent members should be competent and sufficiently<br />
<strong>in</strong>formed to make judgments for susta<strong>in</strong>ability of the company.<br />
Role of Independent Board Members<br />
Components of Independence (*)<br />
• Handle ‘the agency problem’<br />
between the shareholders and<br />
the management (fraud,<br />
crony<strong>is</strong>m, lethargy, r<strong>is</strong>k<br />
aversion, r<strong>is</strong>k prone)<br />
• Evaluation of the r<strong>is</strong>k-reward<br />
balance, short term – long term<br />
returns, stakeholder <strong>in</strong>terests,<br />
ethical conduct – market<br />
realities, oversight - motivat<strong>in</strong>g.<br />
• Prevention of preferential<br />
treatment of any stakeholder.<br />
• F<strong>in</strong>ancial: Corporate<br />
governance codes mostly<br />
def<strong>in</strong>e <strong>in</strong>dependence <strong>in</strong> terms<br />
of the f<strong>in</strong>ancial <strong>in</strong>terest of the<br />
member<br />
• Intellectual<br />
• Political<br />
• Gro<strong>up</strong> Independence<br />
• Emotional<br />
(*) Independence argument should not be carried too far to elim<strong>in</strong>ate qualified candidates who may<br />
serve the corporation well and go for people who do not have relevant experience.<br />
P T PR C I G O
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