Independent Director – Abolish the Institution

Abstract

Globally, publicly-traded limited-liability companies (hereafter, companies) dominate the corporate sector. Their corporate governance structure is similar across the globe – centralized management. The board of directors (board) is responsible for the company’s management and governance. Shareholders, the residual claimants, have no right to participate in the day-to-day decision-making. This structure results in the separation of ownership from control. The board appoints a CEO and delegates to her the power for the company's day-to-day management.1 She leads the management team. Her decisions affect shareholders’ wealth but do not affect her wealth materially, as she receives the compensation committed by the company with a small variable component. The CEO operates under the guidance and oversight of the board. Shareholders use the voting right to elect the directors, appoint the auditor, and approve proposals placed before the assembly of shareholders. The companies act, and capital market regulations protect the shareholders’ interests. 2