Directorship Of A Company: Responsibilities Through Higg's Report

"Power isn't control at all — power is strength, and giving that strength to others. A leader isn't someone who forces others to make him stronger; a leader is someone willing to give his strength to others that they may have the strength to stand on their own."

― Beth Revis, Across the Universe

After putting up a Director tag on a member of the Company, he plays the role of the same and is obliged to take up certain responsibilities for the well-being of the Company. Basically, the executive directors are endowed with the regular working of the Company. Non-executive and independent directors do not owe any responsibility regarding the day-to-day functioning of the Company. Their duties are mostly governed by voluntary codes and compulsory listing agreements. These codes are generally corporate governance codes which tend to scrutinise the duties of the directors. The most common grounds for use of non-executive directors are to 'give access to relevant external information, provide an independent appraisal and check on management, strengthen the board, give new perspective on the company direction etc.'¹

The Higgs Report in 2003 broadly divided the role of non-executive director into four parts:

1. Contribute to the development of company's strategy,
2. Scrutinise the performance of the management regarding the agreed goals,
3. Verify that the risk management system is robust and
4. Contribute to appointment of senior management and determine remuneration of executive directors etc.²

It also lays down grounds for determining the independence of non-executive director on the basis of shareholding and multiple directorships also keeping in mind, the procedures of the company. Higgs Report also proposes that non-executive directors are to be appointed by board after recommendations from a nomination committee which would consist of a majority of non-executive directors.³ It suggests that the remuneration structure of the directors should be transparent in nature. Such recommendations are also to be found in the OECD Principles of Corporate Governance.

Footnotes

^{1. Bob Tricker, 'The independent director' [1982]}

^{2. Higgs Report (2003) 27}

^{3. ibid 40-41}