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General Issue

Director Appointments: Expressing Board Care and Diligence

Author

Thea Voogt and Martie-Louise Verreynne

Shareholders’ rights to appoint directors in widely-held companies are effectively held by the incumbent board as ‘agents’. This article advocates for the adoption of an integrated instrument designed to enhance accountability for the composition of the board, which sits at the apex of the board’s autonomous corporate control. Formulated as a focused numbered checklist, the instrument was developed through textual and statistical analytical techniques, drawing on empirical evidence from director skills matrices disclosed by large listed Australian companies. The instrument acts as an expression of the legal duty of care and diligence that the directors discharge in selecting board members, and relies on disclosure to make the market for corporate control more efficient: if the board is more accountable, shareholders are better able to monitor and discipline the directors.

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