Nominee directors face difficult balancing act

IT is a truism that a director is required to act in the company's best interests, but a shareholder need only look after his own.

For the nominee director, this raises a troubling conundrum. After all, he is appointed to the board by specific shareholder(s) - usually a parent company, a major shareholder, or joint venture or institutional investor - with the aim of safeguarding their interests. Yet, he must nevertheless ensure that he is acting in the best interests of the company, no different from any other director of the company.

Despite the potential conflict of interest, the law has long accepted the existence of the nominee director. The challenge lies in how a nominee director, his appointer and the company that he serves as director address these conflicts.