The Gazette 1992

i 1 E W T Corporate Guardians I N V p !o

APRIL 1992

GAZETTE

unenviable task at the best of times and may be virtually impossible in a board room situation. Committees of non-executive directors are of course asked from time to time to take on particular duties - perhaps in the area of recruitment of senior executives - but to ask them to be the regular guardians of the interest of the company, its shareholders or its employees is to impose a herculean task on them. A particular problem arises for the "worker directors" in our semi-State sector. In a number of such companies the clash between their duties as directors under our company law and the loyalty which they naturally feel for the interests of the workers they represent has given rise to considerable difficulties on several occasions. When the concept of the worker director was being introduced, some consideration was apparently given to introducing the German two tier system of corporate governance. Perhaps it was time it was looked at again.

board or committee. The supervisory board appoints the board of directors, supervises its activities and may enquire into the directors' conduct and the state of the company's affairs. T\vo-thirds of the members of the superior board are elected by the shareholders and the other one-third by the employees by secret ballot. The supervisory board therefore operates independently of the board of directors which carries on the day to day management of the company. The supervisory board meets several times a year to receive reports from the board of directors and apparently exercises significant influence on the conduct of the company. This German system has been in operation throughout the years of Germany's economic progress in the post 1945 period. It has clearly not inhibited the success of Germany's great trading companies. Perhaps it is time we thought of including in our company legislation some of the practices which have worked well in countries which are economically prosperous and not continue to depend largely on those which have recently proved so horrendously inadequate in Great Britain. •

Recent corporate difficulties have focused attention on aspects of corporate governance in Ireland. The roles of the chairmen and non executive directors have come under scrutiny, particularly in the Greencore situation. Without wishing to add to the comment on that particular matter, it does appear that there are unrealistic expectations of the power and influence which non-executive directors can exert. As things stand, it may be too much to expect that non-executive directors - effectively chosen by the board - exercise firm control over a thrusting chief and other senior executives in a prospering company. The sort of person who is likely to be chosen as a non-executive director, will probably be the holder of several similar positions in other companies, is likely to be a semi-retired businessman or an accountant, lawyer or banker, or an executive of another company. The atmosphere of the board is likely to be too "clubbable" and an autocratic chief executive supported by other executive directors is likely to be able to make life extremely uncomfortable for any non-executive director who wishes to "blow the whistle" on any aspect of the company's affairs. Supervising one's peers is an

German public companies have both a board of directors and a supervisory

Doyle Court Reporters Principal: Á i ne O'Far rell Court and Conference Verbatim Reporting Specialists in Overnight Transcription 2, Arran Quay, Dublin 7. Tel: 722833 or 862097 (After Hours) Fax: 724486 Excettence in disporting since 1954

93