3.2 Structure the board to add value
The ASX guidelines (2014, p. 4) states that ‘a listed entity should have a board of an appropriate size, composition, skills and commitment to enable it to discharge its duties effectively’. The Company’s board structure, in the most part, is consistent with this ASX principle.
The Board is comprised of eight independent non-executive directors (INED), one connected non-executive director (CNED), and one executive director (WOR 2016a). This board composition is in accordance with the ASX Recommendation 2.4 of having a majority of independent directors. It is the presumption that having independent directors will promote effective functioning of the board and the management. The presence of independent …show more content…
According to Fama and Jensen (1983 cited in Liew Chui, Zain & Jaffar 2014), an independent chairman, with his intention to preserve his personal reputation within the industry, is perceived to be more vigilant and diligent in the implementation of board monitoring function. Whilst the separation between the Chairman and the CEO is maintained, the Board considered John Grill, which is a CNED, to be the most appropriate director to lead the Board for two reasons (WOR 2016b). First, the Company could benefit from Mr. Grill’s strong relationship with major global customers and his extensive experience in the resource and energy industry. Second, Mr. Grill is a substantial shareholder, which aligns his interests with those of all other shareholders. In this set-up, the criticism under the agency theory that directors may take different views and interests from their shareholders relating to corporate risks (Tricker 2015) will not be of a concern. It is important to note though that Mr. Grill was also the CEO from listing until 2012. The becoming of a retiring CEO to the board chairmanship is opposed on some codes of good practice of corporate governance (Tricker 2015). To ensure that the views and concerns of the eight INEDs are well-raised and considered, the Board has appointed Ron McNeilly to the role of Lead Independent Director, which is …show more content…
Grill’s substantial shareholding that the Board also appointed him to chair the nomination committee. It is interesting to note though that it is written in the charter that the board should appoint an independent director as committee chairman. Although the board did not follow the part of ASX recommendation 2.1 on the use of independent director as committee chairman, it did, however, comply with the rest of the recommendation. The ASX recommends that the nomination committee should have at least three members, a majority of whom are independent directors. The nomination committee has nine members apart from the chairman, all of whom are independent directors. According to Tricker (2015), the board relies on the presence of independent directors to avoid a dominant director such as the chairman or CEO from pushing the appointment of his or her preferred candidate. Tricker (2015), however, also argues that the supposed independence of outside directors can be illusory, such in cases that they could form an allegiance towards the chairman or CEO. It is worth mentioning in this report that Mr. McNeilly and other two independent directors on the committee have each been non-executive directors of the Company for more than 13 years, and the Chairman and CEO each has tenure of over 20 years with the
The ASX guidelines (2014, p. 4) states that ‘a listed entity should have a board of an appropriate size, composition, skills and commitment to enable it to discharge its duties effectively’. The Company’s board structure, in the most part, is consistent with this ASX principle.
The Board is comprised of eight independent non-executive directors (INED), one connected non-executive director (CNED), and one executive director (WOR 2016a). This board composition is in accordance with the ASX Recommendation 2.4 of having a majority of independent directors. It is the presumption that having independent directors will promote effective functioning of the board and the management. The presence of independent …show more content…
According to Fama and Jensen (1983 cited in Liew Chui, Zain & Jaffar 2014), an independent chairman, with his intention to preserve his personal reputation within the industry, is perceived to be more vigilant and diligent in the implementation of board monitoring function. Whilst the separation between the Chairman and the CEO is maintained, the Board considered John Grill, which is a CNED, to be the most appropriate director to lead the Board for two reasons (WOR 2016b). First, the Company could benefit from Mr. Grill’s strong relationship with major global customers and his extensive experience in the resource and energy industry. Second, Mr. Grill is a substantial shareholder, which aligns his interests with those of all other shareholders. In this set-up, the criticism under the agency theory that directors may take different views and interests from their shareholders relating to corporate risks (Tricker 2015) will not be of a concern. It is important to note though that Mr. Grill was also the CEO from listing until 2012. The becoming of a retiring CEO to the board chairmanship is opposed on some codes of good practice of corporate governance (Tricker 2015). To ensure that the views and concerns of the eight INEDs are well-raised and considered, the Board has appointed Ron McNeilly to the role of Lead Independent Director, which is …show more content…
Grill’s substantial shareholding that the Board also appointed him to chair the nomination committee. It is interesting to note though that it is written in the charter that the board should appoint an independent director as committee chairman. Although the board did not follow the part of ASX recommendation 2.1 on the use of independent director as committee chairman, it did, however, comply with the rest of the recommendation. The ASX recommends that the nomination committee should have at least three members, a majority of whom are independent directors. The nomination committee has nine members apart from the chairman, all of whom are independent directors. According to Tricker (2015), the board relies on the presence of independent directors to avoid a dominant director such as the chairman or CEO from pushing the appointment of his or her preferred candidate. Tricker (2015), however, also argues that the supposed independence of outside directors can be illusory, such in cases that they could form an allegiance towards the chairman or CEO. It is worth mentioning in this report that Mr. McNeilly and other two independent directors on the committee have each been non-executive directors of the Company for more than 13 years, and the Chairman and CEO each has tenure of over 20 years with the