Good article in the Business Times (Singapore) about the election and roles of INEDs (Independent Non-Executive Directors) by David Smith, head of corporate governance at Aberdeen Asset Management Asia.
At present we allow the controlling shareholder to vote on the election of the individuals - the INEDs - charged with reviewing the performance of the executive. But how can an individual be expected to be independent from management if management are the controlling shareholder who recruited, nominated and elected that individual?
It is important that before we consider further amendments to the Listing Rules or Codes of Corporate Governance, which inevitably pile even more responsibilities onto INEDs, we should step back and consider a) the abuses we seek to prevent, and b) the mechanisms that we might wish to implement by which we can prevent such abuses.
.... INEDs are separately approved by both a) all shareholders and b) just independent shareholders.
.... where an individual does not pass the "independent vote", the board make representations as to why the individual is fit to be an independent director at the company. On certain transactions, those that did not pass the "independent vote" could be restricted from providing an opinion.