What to consider for appointment of independent director of PLC

Directors

The following are some points to consider for the appointment of an independent director of a public listed company (“PLC”):

1. Whether a candidate for the position of independent director is able to exercise independent judgment and act in the best interest of the PLC.

2. Whether the background and current activities of a candidate for the position of independent director qualify him or her as an independent director.

3. Whether a candidate has long or close relationship with the board and management of the PLC, which may affect his/her ability to exercise independent judgment.

4. The remuneration and incentives for an independent director should not conflict with his or her obligation to bring objectivity and independent judgment on matters discussed at board meetings.

5. The PLC should minimise or limit an independent director sitting on subsidiaries. Directorships in multiple entities within the group may create undue dependence in terms of remuneration received by an independent director, which may raise concerns on the objectivity of this director.

6. The board of directors of the PLC should utilise independent sources to identify suitably qualified candidates for an independent director.

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This post was first posted on Linkedin on 8 March 2021.

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