The non-executive director

Abstract

The non-executive director has become an important feature in the good corporate governance of companies. In Chapter l, l have defined the term 'non-executive director' and brought out the distinction between executive and non-executive director. In Chapter 2, I discussed the historical evolution of the non-executive director and gone through the developments on the subject which occurred in the U.K. during the past decade. I also discussed the European Union approach to the non-executive director and major international developments on the topic, namely the OECD Principles of Corporate Governance. I examined also the Maltese position on the non-executive director where the Stock Exchange recently published a Draft Code of Good Corporate Governance. The final version of the Code will be published by next October 2001 and will be applied to Maltese listed companies on a voluntary basis. The role of the non-executive director was considered in Chapter 3, where l also discussed the non-executive director's functions and powers. l dealt with the qualities of the non-executive director in Chapter 4. The appointment, removal and disqualification of non-executive directors were also discussed. In Chapter 5, l reviewed the duties, responsibilities and liabilities of the non-executive director. These are the same as those of the executive director, and at times, they may be greater because a non-executive director having a particular expertise could be required to use a greater degree of skill in the area of his expertise; at other times the non-executive director's responsibilities may be lesser than those of executive directors and this in cases of wrongful trading where a Court would probably be more lenient to the part-time non-executive director who was not involved in the day-to-day running of the company. Chapter 6 discusses the future of the non-executive director. In completing this dissertation, I conducted considerable research in U.K. legal, financial and accounting publications especially through correspondence. I have tried to gather all the existent material on the subject and apply it to the Maltese context. My experience as a non-executive director of Kordin Grain Terminal Company Limited, a Government-owned company, helped me a lot especially :from the practical side of things. I hope that this work may be of help to Maltese non-executive directors in the fulfilment of their duties. I also hope that the suggestions made in my dissertation, especially those relating to the introduction of Guidance Rules for advocate-non-executive directors, are met with approval by the interested bodies. In 1998, the United Kingdom Law Society issued an advice to its members highlighting issues which solicitors should consider before accepting an appointment as a non-executive director as well as other rules which should be observed during the term of the directorship. I sincerely hope that the Commission for the Administration of Justice and the Chamber of Advocates issue similar rules for Maltese lawyers acting as non-executive directors. Other professional bodies such as the Accountancy Board and the Chamber of Architects are also encouraged to issue similar guidance rules for their members acting as non-executive directors.