Black holes in corporate governance ecosystem
"Best practices" are often adopted without sufficiently considering whether they'll work or add value in the environment where they are to be implemented.
IN my favourite movie of 2016, Arrival, 12 giant pod-shaped spacecraft descended onto Earth, and mankind scrambled to decipher the complicated circular symbols that the aliens used in their communication. If these aliens had come to earth to learn about corporate governance, they would no doubt be scrambling to decipher the rituals and anomalies that are like black holes in our corporate governance ecosystem.
Perhaps the most glaring anomaly is that directors who are chosen by controlling shareholders and can be easily removed by them are considered independent.
Some countries, however, have tried to strike a better balance between the views of controlling and minority shareholders in the appointment of independent directors (IDs) by changing the election process. In the UK, IDs of premium-listed companies with controlling shareholders are elected through a dual-voting system involving all shareholders and independent shareholders, although if these two votes diverge, a second vote of all shareholders prevails.
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