You have been asked whether you would want to consent to be appointed as a non-executive director
Question:
You have been asked whether you would want to consent to be appointed as a non-executive director (NED) of the public listed company due to your many years of experience managing your own company which has grown from a sole proprietor to a medium size reputable company. In addition, you are a qualified professional accountant being a member of a professional accounting body.
Your own company does not have any non-executive directors on its board and you are uncertain about the role of a NED especially that you yourself is a professional accountant and your expertise in accounting is one of the criteria you have been asked to sit on the board of that company. You have read about the differences between an independent and a non-independent director but are still unsure what they mean and why the distinctions are significant.
He recalls reading somewhere in a newspaper that non-executive directors are meant to 'keep the peace between the executive directors and the shareholders. He doesn't understand why there should be a conflict and is worried about what he'll have to do.
You have also been asked whether you want to be paid partly in shares or share options, in line with the way executive directors are paid in a listed company.
Required:
(b) Assessing any three of the main areas for a potential conflict of interest between the shareholders of a listed company and its executive directors, and explaining how the use of non-executive directors should help to deal with this problem. You should use your knowledge of the role of a professional accountant bearing in mind that you are subject to the codes of conducts issued by the professional accounting body that you are a member.
(c) Discussing any three issues connected with paying NEDs in shares or share options of the company.