‘Non-executive independent boards are a waste of time. They have little involvement in a company and are not aware of what is really going on’ Discuss this statement and provide an argument to support or negate this premise, using evidence from the literature.
Non executive independent board members are those members of the board which do not have an executive position in the organization or do not have any personal interests associated with the business affairs of the organization. Non executive independent directors play a very strong role by giving constructive criticism and valuable advice to the Board which comes from their large amount of experience in public life or organization management and their independence.
As per The Cadbury Report, they are very important for the organization as they provide an independent view point on various issues such as related to the strategic direction, the performance of the organization, the utilization of resources, appointment at key positions in the organization, etc. (Higgs 2003, pp. 3-9). Thus the statement mentioned ‘Non-executive independent boards are a waste of time. They have little involvement in a company and are not aware of what is really going on’ is not correct and it undermines the vital role played and the contribution given by the non executive independent directors to organization. As these board members are free from business, personal or any other kind of beneficial relationship with the organization’s operations, they offer an unbiased and independent judgment on important issues affecting the organization. However, a certain section of intellectuals also believe that the Non executive independent directors do not add much value to the organizations and thus they are not required by the organization. This thought comes from the belief that the non executive independent directors are too detached from the organization’s affairs that they don’t contribute significantly as expected. This belief is not entirely correct and if certain mechanisms can be put in place by appointing the Non executive independent directors by the organization, the shortcomings can be overcome. This essay will try to discuss the importance of the non executive independent directors to the organization, the reasons why sometimes they look ineffective, the measures which can be taken to make them more effective for the organization and the approach adopted by the non executive independent directors to become more valuable for the organization.