The Gazette 1992

GAZETTE

1 E

I N

APRIL 1992

p !o

Corporate Guardians

Recent corporate difficulties have

focused attention on aspects of

corporate governance in Ireland. The

roles of the chairmen and non

executive directors have come under

scrutiny, particularly in the

Greencore situation. Without

wishing to add to the comment on

that particular matter, it does

appear that there are unrealistic

expectations of the power and

influence which non-executive

directors can exert.

As things stand, it may be too much

to expect that non-executive directors

- effectively chosen by the board -

exercise firm control over a thrusting

chief and other senior executives in a

prospering company. The sort of

person who is likely to be chosen as

a non-executive director, will

probably be the holder of several

similar positions in other companies,

is likely to be a semi-retired

businessman or an accountant,

lawyer or banker, or an executive of

another company. The atmosphere

of the board is likely to be too

"clubbable" and an autocratic chief

executive supported by other

executive directors is likely to be able

to make life extremely uncomfortable

for any non-executive director who

wishes to "blow the whistle" on any

aspect of the company's affairs.

Supervising one's peers is an

unenviable task at the best of times

and may be virtually impossible in a

board room situation.

Committees of non-executive

directors are of course asked from

time to time to take on particular

duties - perhaps in the area of

recruitment of senior executives -

but to ask them to be the regular

guardians of the interest of the

company, its shareholders or its

employees is to impose a herculean

task on them.

A particular problem arises for the

"worker directors" in our semi-State

sector. In a number of such

companies the clash between their

duties as directors under our

company law and the loyalty which

they naturally feel for the interests of

the workers they represent has given

rise to considerable difficulties on

several occasions.

When the concept of the worker

director was being introduced, some

consideration was apparently given

to introducing the German two tier

system of corporate governance.

Perhaps it was time it was looked at

again.

German public companies have both a

board of directors and a supervisory

board or committee. The supervisory

board appoints the board of

directors, supervises its activities and

may enquire into the directors'

conduct and the state of the

company's affairs. T\vo-thirds of the

members of the superior board are

elected by the shareholders and the

other one-third by the employees by

secret ballot. The supervisory board

therefore operates independently of

the board of directors which carries

on the day to day management of

the company. The supervisory board

meets several times a year to receive

reports from the board of directors

and apparently exercises significant

influence on the conduct of the

company.

This German system has been in

operation throughout the years of

Germany's economic progress in the

post 1945 period. It has clearly not

inhibited the success of Germany's

great trading companies. Perhaps it

is time we thought of including in

our company legislation some of

the practices which have worked

well in countries which are

economically prosperous and not

continue to depend largely on those

which have recently proved so

horrendously inadequate in Great

Britain.

•

Doyle Court Reporters

Principal:

Á i ne O'Far rell

Court and Conference Verbatim Reporting

Specialists in Overnight Transcription

2, Arran Quay, Dublin 7.

Tel: 722833 or 862097

(After Hours)

Fax: 724486

Excettence in disporting since 1954