Procedure for electing an independent director (independent non-executive director) in a joint-stock company

Abstract

The procedure for electing an independent director (independent non-executive director) of the supervisory board (board of directors) in a joint-stock company is analyzed in the article.
It is stated that the nomination of candidates by shareholders for the position of an independent member of the supervisory board contradicts the inherent characteristic of this official, namely his impartiality and negatively affects his objective decision-making in corporate governance. On the other hand, attributing to the competence of the supervisory board the authority not only to nominate, but also to elect members of the supervisory board cannot be considered the optimal solution for the procedure for electing members of the supervisory board. The concentration in the supervisory board of all powers to elect and dismiss independent members carries the risk of shareholders losing control over this management body. This is perhaps the main problem of corporate governance in countries with the Anglo-American legal system.
It is noted that the optimal solution between the two extreme points of view expressed above is to maintain a balance between the influence of the supervisory board and the general meeting of shareholders: namely, the nomination of candidates by the supervisory board and their election by the general meeting.
The article argues for establishing a balanced procedure for election with the participation of both shareholders (through the general meeting) and the supervisory board in an imperative manner, without the possibility of departing from these provisions by adopting acts of local lawmaking. For this purpose, it is proposed to change the dispositive nature of paragraph five of part 1 of Article 77 of the Law to an imperative one by excluding the words “if this is provided for by the internal documents of the company”. And in part one of Article 72 of the Law, directly establish the procedure for electing members of the supervisory board upon the proposal of the supervisory board’s nomination committee.
It is argued that the implementation of a balanced approach to the procedure for election to the position will contribute to increasing the independence of the supervisory board (board of directors) and minimizing the influence on the control body from the shareholders and the executive body, as well as a higher level of ensuring the protection of the rights and interests of all groups of stakeholders of the company.