Principles of participation of an independent member of the supervisory board in corporate governance

Abstract

The article analyzes one of the legal borrowings, such as the institution of an independent member (non-executive director) of the supervisory board (board of directors), which was enshrined in the Law of Ukraine «On Joint Stock Companies».
The author systematizes the principles on which an independent member of the supervisory board (independent director) participates in the management of JSC. One of these principles is the principle of personal participation in the management of the company. It is emphasized that personal participation means the direct personal involvement of an independent director in the performance of functions assigned to the supervisory board or independent non-executive directors in the case of the introduction of a one-level corporate governance structure in the company.
It is emphasized that the principle of independence is definitely of decisive importance in the process of the independent members of the supervisory board (independent directors) exercising their powers and consists in the absence of financial and family ties between the directors and the corporation.
The author proves that the principle of prohibition of combining positions is of particular importance in the activities of independent members of the supervisory board (independent directors), as it is one of the defining characteristics of their independence.
It is emphasized that the application of the principle of term of authority exclusively to state joint-stock companies is not entirely justified. This principle should be applied to all joint-stock companies, regardless of the form of ownership. Otherwise, the principle of the balance of public and private interests is violated, since the candidate for the position of independent member of the supervisory board (independent director) cares more about the interests of shareholders and groups of other independent members of the supervisory board (independent directors), on whom it depends whether he will be re-elected or not. The interests of other stakeholders (the state, companies, investors, employees) take a back seat.
It is proposed to amend Article 72 of the Law of Ukraine «On Joint-Stock Companies» and read it as follows: «Persons elected as members of the supervisory board (except independent members of the supervisory board) may be re-elected an unlimited number of times. A person shall not be an independent member of the supervisory board for more than two terms in a row.»