Making Boards More Effective: The Issue Of Independence

One of the critical issues in ensuring the effectiveness of the corporate board is independence, that of the board and that of the directors who constitute it. The present article looks at this issue, drawing on best practice guidelines from different parts of the world and contrasting with the situation in Nigeria, as drawn from a survey of Nigerian companies and a review of data from several publicly quoted companies. The authors argue that the independence of the board will be put in jeopardy if the board is made up mainly of executive directors, and if the non-executive directors, where they exist, have significant relationships with parties connected to the firm. Other sources of threat to the independence of the board are the combination of the positions of the chairman and the chief executive, and a system of appointing directors in which the management plays a predominant role. The article recommends the development of corporate governance guidelines for Nigeria, with clear criteria for evaluating independence. LBS Management Review Vol.6(1) 2001: 38-4