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Executive or non-executive directors

Executive or non-executive directors Introduction

Directors, whether executive or non-executive, should always carry out their duty in a high standard of care. All directors and officers of a company are bound by a number of general law and statutory duties. According from Daniels v Anderson (1995), the case clarifies that the same standards are imposed on both executive and non-executive directors.

In this essay, a short summary about ASIC v Adler will be provided, followed by an explanation of each of the Corporation Act Adler had contravened by relates it to the principle law and lastly a conclusion of this assignment.

In ASIC v Adler (2002), HIH, HIHC, Adler Corporation Pty Ltd (Adler Corporation), Mr Adler, Mr Williams and Mr Fodera had contravened the Corporations Act. These findings are explained below.

ASIC v Adler (2002) Case

This case basically deals with four types of transactions. The main defendants were Rodney Adler (a substantial shareholder and non-executive director of HIH, also an officer of HIHC), Ray Williams (the founder and Chief Executive Officer of HIH) and Dominic Fodera (a director and Chief Financial Officer of HIH).

In June 2000, Casualty and General Insurance Co Ltd (HIHC), a subsidiary of HIH Company, provided an unsecured and undocumented $10 million loan to Pacific Eagle Equity (PEE), a company controlled by Adler. The transfer was performed by Dominic Fodera. The 10 million loans were arranged without any knowledge of other directors of HIH.

PEE became the trustee of Australian Equities Unit Trust (AEUT), which controlled by Adler Corporation (Adler was only the director and he and his wife, the only shareholders). Units were then issued by AEUT to HIHC at a value of $10 million. However, the value of the trust that PEE managed was worth less than $10 million. PEE used the $10 million loan in the following transaction:

  • Approximately $4 million loan was used to acquire HIH shares on the stock market. Adler intended to create a false impression to the stock market that he was helping HIHs falling share, hopping to increase the share price, or at least prevent the share price from falling dramatically. Shortly, PEE sold HIH shares at a $2 million loss.
  • Nearly $4 million loan was used to purchase of unlisted shares in unlisted technology and internet companies from Adler Corporation. Unfortunately, Adler Corporation suffered the total loss on these investments.
  • About $2 million was lent to Adler and the associated interest without sufficient documentation and it was an unsecured loan.
Courts decision

The court held that:

  1. HIHC illegally provided financial assistance of $10 million to PEE to obtain shares in HIH. No disclosure was made to other directors or to the investment committees. Furthermore, the $10 million unit trust subscribed by HIHC was worth less than the initial subscription. As a result, this action materially prejudiced the interest of HIHC, HIH and the shareholders. Thus, section 260A was contravened.
  2. Adler had convicted multiple breaches of directors duties. There are under section 180, 181, 182 and 183 of the Corporations Law.
  3. Williams had contravened his director duties under section 180 and 182 of the Corporations Law. He failed to ensure the presence of a proper safeguard before allowing HIHC to lent $10 million to PEE.
  4. Fodera had contravened his director duties under section 180(1) of the Corporations Law. He failed to submit a proposal to HIHs boards or the investment committees approval for lending $10 million to PEE.
Directors Duties

Under the Corporate Law, a director can be defined as a person who acts in the position of director, regardless of name called or whether he/she validly appointed as an official director. Breach of the duties may not only be detrimental to the companies but also may result in civil and criminal liability. As mentioned above, Adler had contravened Sections 180 to 183.

The Corporations Law requires directors to:

  • (s180) Act with care and diligence
  • (s181) Act in Good faith (bona fide)
  • (s182) Avoid improper use of position, and
  • (s183) Avoid improper use of information

Duty to act with due care and diligence

Section 180(1) of the Corporation Act states that directors or other officers in a company is essential to discharge their powers and duties with proper care and diligence as if a reasonable person would have acted if they:

  1. were a director of the company, and
  2. occupied the office held by, and had the same obligations within the company as the director

In ASIC v Adler, a reasonably careful and diligent director would not have allowed HIHC to loan the sum of $10 million to PEE to use some of the amount to procure HIHs share. Adler also failed to ensure that safeguards were in place to protect HIHC. In fact, Adlers intention was to support HIHs share price for his own substantial shareholding. Furthermore, nearly $4 million was used to acquire unlisted shares. These companies where facing cash flow difficulties and there was a significant risk that these companies would collapsed.

Justice Santow held that:

  • to determine whether a director has act on reasonable care and diligence, a question must be asked; what a normal person with same knowledge of Adler, would respond to this situation if he/she was acting as a director
  • court will consider the companys condition and directors obligation and position within the company
  • a director was appointed because of his/her expertise in certain area of the company
  • business judgment rule can be applied to director, provided that the director has acted in good care and diligence

It is essential for all directors, whether executive or non-executive, to act in a minimal standard of care and diligence, stated under Daniels v Anderson (1995).

Business Judgement Rule

Section 180(2) of the Corporation Act implemented a protection to a director to make a business judgement will only apply if the duty of care and diligence is carried out where all the following aspects are shown:

  • the judgement was executed in good faith for a proper purpose
  • did not have material personal interest with the company
  • informed themselves about the subject matter of the judgement which they rationally believed to be appropriate
  • rationally believed that the judgement was carried out in the best interest of the company

These beliefs can be viewed as a rational business judgement unless none of the directors would have acted similarly. Section 180(2) provides directors from personally liable for their decision made in good faith and in the best interest of the company. One of the main reasons to enforce business judgment rule is to encourage directors to be more risk taking because they are assured by this regulation that if they perform their duty in honest, they will not be liable if something goes wrong.

Adler brought up the defence of the business judgment rule to avoid the liability for contravened section 180(1). The court concluded that the defence, section 180(2), was not valid to protect Adler. The rule may be invoked only if a decision is made and will not cause the company to suffer loss because the directors failed to act good faith for a proper purpose.

Duty to act in good faith in best interest of the company

Section 181(1)(a) of the Corporation Act states that a director should perform their power and duties in good faith in the interests of the company as a whole. The requirement to perform in good faith is generally refer to an obligation to act honestly.

Two tests, a subjective and an objective, are required for the court to determine whether a director has breached the duty to act bona fid (good faith).

  • the court studies the actual intention of the director to conclude whether he or she was honest, and
  • the court judges whether a reasonable person, in the directors position, would have perform alike under the same circumstances

Adler used some of the money to purchase HIH share for his own interest in order to make a gain for his own shareholding in HIH. He has also contravened related party transaction provisions contained in section 208 and 209, and the financial assistance provisions contained in section 260A-260D of the Corporations Act. The payment caused interest conflict between Adler personal interest and the companies in pursuing profits. Santow J held that Adler had contravened his duty to act in good faith in the interest of HIH and HIHC.

Duty to act for a proper purpose

Section 181(1)(b), a director must perform their power and duties for a proper purpose. There is a close link between proper purpose and duty of good faith. Thus, duties to act in good faith in the best interest of the company and for a proper purpose are often considered together. For example, if a power is carried out without a proper purpose, it will probably be contrary to the companys interest.

An improper purpose can be defined under the cases of Howard Smith Ltd v Ampol Petroleum Ltd (1974), where it was primarily engaged in to dilute the majority shareholdings. A director can be in breach of section 181 where his or her power is performed for an improper purpose, even if he or she believes he or she is acting honestly.

Adler acted for an improper purpose by seeking to obtain a benefit from the unsecured loan by using part of the funds to purchase HIH shares. Adlers intention was trying to benefit himself at the detriment of HIH.

Avoid improper use of position

Section 182(1) of the Corporation Act prohibits a director to inappropriately utilize his or her position to:

  • achieve an advantage for himself/herself or someone else, or
  • cause detriment to the company

In the case of R v Byrnes and Hopwood (1995), section 182 does not require proof that the director actually achieved his or her purpose to gain an advantage for himself/herself or someone else. Rather, this section requires proof that the director believed that the intended result would be an advantage for himself/herself or someone else or causes detriment to the company.

The Court stated that impropriety must be measured objectively. Impropriety will occur when a director granted the company to have a business transaction with a third party in which the director has an interest and fails to disclose it to the company. Adler has breached section 182. Adler took advantage of his position for requesting a $10million loan from HIHC to PEE (a third party company). Furthermore, Williams also breached section 182 by inappropriately using his position as a Chief Executive Director of HIH to gain an advantage for Adler. Williams had caused detriment to HIH and HIHC by authorising the $10 million loan to PEE without ensuring that the proper safeguards were in place.

Improper use of information

Section 183 of the Corporation Act states that a director must not inappropriately utilize the information gain to:

  • achieve an advantage for himself/herself or someone else, or
  • cause detriment to the company

For example, a director is prohibited to use special knowledge, which he or she may has gained because of his or her contact with the stockbroker, to buy shares for him or herself that could have been purchased on behalf of the company.

Furthermore, a director can be liable for breach of section 183 despite no loss being caused to the company. In the case of ASIC v Steve Vizard (2005), Vizard used confidential price sensitive information for his own benefit and he was fined nearly $400,000 and 10 years of disqualification from managing a company.

Criminal Penalties

Section 184 of the Corporations Act states that a reckless or dishonest director who contravenes of sections 181 or 182 or 183 or the entire corporations act leads to:

  • criminal offenses with maximum imprisonment up to 5 years
  • fines of up to $200,000
  • or both

In some cases, directors may be disqualified from the workplace. In ASIC v Adler (2002), Adler was a director of HIH and should act on behalf of HIH. However he advanced for his own financial interests before HIHs interests. The law clearly states that a director must act in honest and in the best interests of the company or shareholders. Adler had contravened serious offenses and displayed lack of commercial morality. Directors are not appointed to take advantage of their own interests, but to govern the company for the benefit of the shareholders. Therefore, Adler was disqualified as a director for 20 years, $900,000 fines and 5 years in prison.

Related party transactions

There are many other statutory provisions in the Corporations Act which have a direct impact on directors, such as prohibiting a company against financial benefits without disclosure.

Under section 208, a company is required to obtain the approval of the members and give the financial benefit within 15 months of the approval if a company wishes to provide a financial benefit to the director or other party. The approval process includes arranging a members meeting and majority passing the resolution. One of the exceptions for this rule is when the transaction is at arms length on ordinary commercial terms, section 210.

In ASIC v Adler, the $10 million was a financial benefit to PEE. However, Adler Corp and Adler contravened section 208 because no disclosure and member approval has been made. Furthermore, the arms length transaction rule (s 210) did not apply to them because the transaction of $10 million was unsecured and undocumented.

Financial Assistance

First of all, financial assistance is not stated under the Corporation Act. Financial assistance can be defined as when a company supports another party to acquire certain shares in its own or holding companies. The most common type of financial assistance is granting of security such as, a fixed & floating charges, over the assets of the company to support the purchaser's financier securing loaned for the purpose of the acquisition.

Under section 260A of the Corporations Act, financial assistance is prohibited unless:

  • it does not materially prejudice the companys interest, its shareholders or the company's ability to pay its creditors, or
  • it is approved by shareholders under section 260B, or
  • it is exempted under section 260C

Therefore, financial assistance that materially prejudices the companys ability to pay its creditors will not breach section 260A because the decision has been carried out under these conditions.

In my opinion, it can be tempting for the directors to make a statement that the financial assistance does not materially prejudice the companys interest. However, directors should resist the temptation to make such a statement. Financial assistance generally put the company in a risky position by putting all of the companys assets to support the other partys interest.

In ASIC v Adler, no disclosure was made to other directors or to the investment committees of lending $10 million to PEE. There was clearly a materially prejudiced in the interest of HIHC, HIH and the shareholders:

  • the $10 million unit trust subscribed by HIHC was worth less than the initial subscription
  • PEE sold HIH shares at a $2 million loss
  • $4 million lost of unlisted shares
  • unsecured loan was provided

As a result, this action materially prejudiced the interest of HIHC, HIH and the shareholders. Thus, section 260A was contravened.

Executive and Non-Executive directors

Executive directors are the full time employees. Executive directors are appointed because of their specialised knowledge and skills of the companys daily operation that the non-executive directors often lack of. On the other hand, the roles of non-executive directors have the duty or obligation to ensure that the board fulfils the company main objectives. The law never implement a rule stating business experience or educational qualification is needed for Non-executive directors. However in the case of Daniels v Anderson (1995), the court sets out minimum standards of care and diligence as a general rule for non-executive directors.

In addition, in ASIC v Rich (2003), the Court stated that Non-executive directors cannot avoid liability by declaring that their duties have a lesser standard compare to executive directors. The standard of care and diligence of a director (Executive or Non-executive) is always objective.

Adler breached section 180(1) because a reasonable and careful person would not permits the $10 million loan to PEE without a proper safeguard applied. Even thought Adler was a non-executive director, executive and Non-executive directors have the same responsibilities under the Corporation Act. All directors, whether executive and non-executive, are required to take reasonable steps to place themselves in a position to work for the best interest of the company.


In conclusion, a company should always ensure it has good corporate governance. Good corporate governance is an essential character of a company. This allows the company to create trust and confidence amongst its members, such as shareholders, directors and all other relevant parties. Good corporate governance increase the companys value and to sustain the company growth. If a company fails to comply the rules under the Corporation Act, the company will be in breach of multiple sections under the Corporation Act.

Furthermore, no law reform was made. Director duties are very important in a company. Directors should not easily got influence by their senior managers and fail in their stewardship. Directors must always familiar with the companys business, such as financial position. Most importantly, as mentioned in Daniels v Anderson (1995), directors, whether executive or non-executive, should always perform their minimum standard of duty.

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What is non-executive director? definition and meaning

non-executive director

Non-working director of a firm who is not an executive director and, therefore, does not participate in the day-to-day management of the firm. He or she is usually involved in planning and policy making, and is sometimes included to lend prestige to the firm due to his or her standing in the community. Non-executive directors are expected to monitor and challenge the performance of the executive directors and the management, and to take a determined stand in the interests of the firm and its stakeholders. They are generally held equally liable as the executive directors under certain statutory requirements such as tax laws.

Also called external director, independent director, outside director, or director at large.

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remuneration of directors
Bank of England
nominee director
Cadbury rules

board of directors

Governing body (called the board) of an incorporated firm. Its members (directors) are elected.

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Non-executive directors - Practices and remuneration trends report - 2016

Non-Executive Directors

The responsibility of directing corporate citizens in today’s environment is a daunting task entailing ever-increasing responsibility for directors. In this issue we examine seven African stock exchanges and look at the level of NED fees paid.

  • Non-executive directors’fees: PAYE or VAT?
  • Shaping the board of the future
  • Profile of a non-executive director
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The Increasing Importance Of Non-Executive Directors

Jersey. The Increasing Importance Of Non-Executive Directors

Recent high-profile judgments and investigations regarding investment fund structures have highlighted some key points to be bourne in mind both by investors and by fund services businesses. The Jersey Financial Services Commission (the "JFSC") has been publicly flexing its muscles through active participation in Court proceedings and designation of investigators to undertake an audit of the activities of a Jersey fund company.

Such moves should not be viewed in a negative light; Jersey's financial services business reputation is founded upon secure regulation and supervision. If Jersey is to maintain its position as a leading offshore jurisdiction, it must be seen to be actively managing and dealing appropriately with any problems that arise.

Certain issues that have arisen surround independence, proper corporate governance and managing conflicts of interests within structures. Businesses that provide legal, administrative and non-executive directorships within the same group have been under scrutiny, particularly as to how they deal with conflicts of issues in the context of regulated entities.

As a result, clients are favouring independent providers; law firms without trust or fund administration arms; trust and company fund administrators that will not insist on providing a full board of directors and, most crucially, non-executive directors.

What is a non-executive director?

A non-executive director is a member of the board of directors of a company who does not form part of the executive management team. Non-executive directors are the custodians of the governance process. They are not involved in the day-to-day management of the company but monitor the executive activity and contribute to the development strategy.

A non-executive director is defined in the Cadbury Report 1992 as persons who "apart from directors' fees and shareholdings [are] independent of the management and free from any other business relationships which could materially interfere with the exercise of independent judgment."

Directors' duties – Common law

Under the Companies (Jersey) Law 1991, as amended ("CJL ") there is no distinction between executive and non-executive directors.

All directors are subject to the following fiduciary duties:

  • exercise honesty in all judgments;
  • act in good faith at all times;
  • to act in the best interests of the company;
  • exercise diligence, care and skill; and
  • exercise prudence.
Statutory duties

Directors have a duty to keep accounting records which are:

(i) sufficient to show and explain the company's transactions, and

(ii) such as to disclose with reasonable accuracy, at any time, the financial position of the company (Article 102 CJL); and

(iii) in accordance with a set of generally accepted accounting principles which must be stated.

If the company is one which is required to be audited the accounts show a "true and fair view of the profit or loss of the company for the period and of the state of the company's affairs at the end of the period". [and which] "shall be approved by the directors. " (Article 104 CJL).

Functions of non-executive directors

Non-executive directors are appointed to bring five key qualities to the board of directors, namely:

  • Independence;
  • Impartiality;
  • Experience;
  • Specialist knowledge (Jersey Financial Services Commission ("JFSC ") requirement); and
  • Personal qualities.

What makes a good non-executive director?

Together with the five key qualities the achievement of balance of the board of directors as a whole as well as commitment, perception and a broad perspective of the area or industry.

The key responsibilities are:

  • Contributing to the strategic direction of the company;
  • Efficiently solving problems that arise;
  • Communicating with third parties;
  • Ensuring all the audit requirements are satisfied;
  • Remuneration of the executive directors;
  • Appointing the board of directors.

Given non-executive directors have a broad perspective they provide a clear view of external factors. Their primary role is to provide an objective and informed view to the board of directors. In particular, non-executive directors should provide constructive criticism on plans and policies devised by the executive team.

The role of the non-executive directors is imperative when internal problems arise, as they may be the only people who can act when a dispute arises between the company and executive director/s e.g. Managing Director or Chief Executive.

When non-executive directors act independently from the board of management, this can avoid a loss of confidence by enabling them to act as interface between shareholders and executive directors at difficult times.

Given non-executive directors are usually entrusted with the duty to connect the business with outside people and networks, as well as represent the company externally, whilst being the main contact with investors, bankers and other interested parties.

Remuneration of executive directors

The non-executive directors normally act as a check on executive directors voting themselves excessive remuneration. It is usually the non-executive directors' duty whilst acting in the best interests of the company as well as acting independently to devise appropriate remuneration and incentive packages, along with severance packages and the terms contained therein.

Appointment of Directors

When selecting executive directors it is pertinent to appoint directors with appropriate experience, qualifications and personal qualities. Non-executive directors shall usually devise appropriate packages by ensuring a good balance of the board of directors is maintained. The non-executive directors usually participate fully in ongoing appraisal of performance with respect to executive directors and all other non-executive directors.

How do non-executive directors add value?

Non-executive directors provide specialist expertise which is essential for viability, hence JFSC vetting and JFSC approval is required to ensure a particular non-executive director is right for a particular fund.

The right people will give confidence to private investors, and are essential to attract institutional investors.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Non-Executive Director Definition

Non-Executive Director What is a 'Non-Executive Director'

A non-executive director is a member of a company's board of directors who is not part of the executive team. A non-executive director typically does not engage in the day-to-day management of the organization, but is involved in policy making and planning exercises. In addition, non-executive directors' responsibilities include the monitoring of the executive directors and acting in the interest of the company stakeholders.

BREAKING DOWN 'Non-Executive Director'

Non-executive directors, also known as external directors, independent directors or outside directors. are put in place to challenge the thinking and performance of a company. Since non-executive directors do not hold C-level or managerial positions, they are thought to hold the interests of the company in higher regard than executive directors, who may have an agency problem or conflict of interest between management and stockholders.

Further, non-executive directors are often included on a firm's board for public relations reasons. For instance, the non-executive director's community status and experience could provide good exposure for the firm. However, non-executive directors are equally liable for the success or failure of a business, as outlined by statutory requirements and tax laws.

Requirements of Non-Executive Directors

Non-executive directors, as a function of their leadership role, are required to embody specific key elements. If, for example, a former CEO of a successful, public technology company assumes the role of a non-executive director with a technology startup, he'll be expected to hold key roles.

First, he is required to keep the executive directors and the entire board accountable. Non-executive directors do this by helping with - and managing - a company's strategy, performance and risk. The non-executive director, in this example, does so by providing executive directors with insight into external factors that may affect the business. He also independently assesses the company's performance, ensuring the firm's shareholders are top of mind. Further, he entrenches himself in the financials of the company to verify fiscal responsibility, putting necessary controls in place.

Second, all non-executive directors are required to commit a significant amount of their time to the oversight of the company. They are expected to disclose other significant time commitments to the board and to inform the board of any changes to their schedules. In the example above, the former CEO may serve as a non-executive director for two technology companies. If this is the case, he must fully disclose his time commitments to both boards.

Finally, non-executive directors are expected to provide value through outside contacts that can benefit the company. In the example above, the well-connected former tech CEO would most likely have warm relationships with venture capital firms that can help the startup.

A paradox in decision analysis in which two individuals acting in their own best interest pursue a course of action that.

The process of selling all the assets of a business, paying off creditors, distributing any remaining assets to the principals.

The process of identification, analysis and either acceptance or mitigation of uncertainty in investment decision-making.

A strategy used by corporations to discourage hostile takeovers. With a poison pill, the target company attempts to make.

An act the U.S. Congress passed in 1933 as the Banking Act, which prohibited commercial banks from participating in the investment.


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  • Corporate Governance - Role of Board of Directors ROLE OF BOARD OF DIRECTORS People often question whether corporate boards matter because their day-today impact is difficult to observe. But, when.
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I am pleased to confirm that the board of the Company, on the recommendation of its nomination committee, has appointed you as a non-executive director. I am writing to set out the terms of the appointment. Please note that this is a contract for services and is not a contract of employment.

Duration of Appointment

The appointment is for an initial term of three years commencing on [date], contingent on your re-election at forthcoming annual meetings and on the appointment not otherwise terminating in accordance with the Company’s constitution or by law.

Non-executive directors are typically expected to serve two three year terms, although the board may invite you to continue on as a director for an additional period thereafter.

Role of the Board
The board’s role is to effectively represent, and promote the interests of, shareholders with a view to adding long-term value to the Company’s shares. Having regard to its role the board directs, and supervises the management of, the business and affairs of the Company including, in particular:
• ensuring that the Company’s goals are clearly established, and that strategies are in place for achieving them;

• establishing policies for strengthening the performance of the Company including ensuring that management is proactively seeking to build the business through innovation, initiative, technology, new products and the development of its business capital;

• monitoring the performance of management;

• Appointing the chief executive officer, setting the terms of their employment agreement and, where necessary, terminating their employment.

• deciding on whatever steps are necessary to protect the Company’s financial position and the ability to meet its debts and other obligations when they fall due, and ensuring that such steps are taken;

• ensuring that the Company’s financial statements are true and fair and otherwise conform with law;

• ensuring that the Company adheres to high.

Non Executive Director Job Description

Best Job Descriptions Non Executive Director Job Description

Sound judgment and impressive decision making skills are two of the most important things that a person must posses in order to run and maintain a company or an organization. In any established companies, a non-executive director is needed to oversee its progress. They are vital for they are reputed to convey unbiased opinions to major corporate decisions and also can contribute diverse experience to the decision-making process.

If you think you have these two key virtues and skills in order to become a non-executive director, then read more to know about this esteemed job.

What is a Non Executive Director?

A non-executive director (NED, also NXD) or outside director is one of the members of a company’s board of directors. However, they are not part of the company’s executive management team. Thus making them an “outside member” of the company, meaning to say, they are not an employee of the company or affiliated with it in any other way. They contribute to the company’s success by giving an objective view of the business. Lastly, they could also improve the board’s effectiveness at relatively low cost by providing valuable business connections.

Duties of a Non Executive Director
  • A non-executive director might be appointed to carry out a specialist role on a part-time basis or their expertise in specific activities, such as strategy and contract negotiation.
  • Although they might only work on a part-time basis, they use their experience and expertise in order to give an independent advice and objectivity. Also, one of their tasks is to monitor the executive management of the company.
  • A non-executive director must conduce to the development of a company’s strategy.
  • They should be examine and scrutinize the management’s performance, making sure that they have met the agreed goals and objectives of the company. Moreover, they should monitor the management’s reporting of performance.
  • Making sure that the company is financially stable is on of the duties of a non-executive director. They should ensure that accurate financial information is on hand and that financial controls and systems of risk management are strong and justifiable.
  • They are also in charge of scrutinizing the right levels of an executive director’s salary. They it is also their ultimate duty to appoint and/or remove (where necessary) senior management and succession planning.
Work Condition of a Non Executive Director

Non Executive Directors usually work part time. They attend board meetings and spend time on specific projects. They could work in an office but they spend most of their time inside the board room together with all the other executives and directors of the company.

Educational Requirements of a Non Executive Director

A non-executive director is usually appointed. The routes tend to be rather different depending on whether it is a public sector appointment or whether it is for a private company. However, they must finish a Bachelor’s Degree (4 year-course) of any kind; preferably a graduate of management or business-related courses. Anyone who has a Master’s Degree or any post-graduate degree would be a plus factor.

Occupation and Progress of a Non Executive Director

A non-executive director’s position is a highly sophisticated and prestigious job. They must work with various people inside a certain company. He or she must have a very good character together with an intelligent decision-making skill because not all people can be appointed to this job. Furthermore, non-executive directors are expected to have a great responsibility over the supervision of the company’s management. Therefore, he/she must give his best in doing his job in order for him/her to progress in his craft.

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Business and Management

Tesco is one of the largest players among supermarket retailers in the UK. The range of services which the supermarket offers is literally unlimited. Tesco offers both food and non-food products. according clothing. electric appliances. entertainment goods and many other items The managers of the store are sure that the large variety of products offered to the customers ensures the increasing profitability of the company

Despite the fact that Tesco has spread into many world countries. it considers UK its primary market and

therefore concentrates most of its efforts on promoting its products in the British market. The UK remains our core market. Our strategy of providing exceptional value and choice for customers ensures that we continue to grow market share. We have four store types. Extra our hypermarket destination shopping offer Superstores Metro our town centre and city centre stores and Express our convenience offer (Business Strategy. Retrieved on April 20th from source. HYPERLINK "http /www .tesco .com " http /www .tesco .com .At present. the market share which Tesco occupies in the UK can be estimated by 6 but the managers of the company are sure that in the future the market share will continue to grow. Figure 1 shows Tesco distribution of employees. turnover and selling space among different countries. The obtained results show that Tesco needs to expand its influence in Asia and Europe Figure 1. Tesco influence in the world

because in the UK its influence is already sufficiently large. The least conquered market for Tesco is Asia. In to expand Tesco influence on this part of the world. it is necessary for the managers to analyze the cultural distinctions and needs of Asian people. It is impossible to use the same strategy for European and Asian people

Tesco needs to compete with many other companies in the global market the most important of which are Wal-Mart. Carrefour and others (Table 1. The global sales of Tesco currently do not allow the company to reach the sales of the top 3 companies. However. well-balanced pricing and quality strategies can help Tesco get into the top three companies in sales Company Global sales. 2001

(VAT (1 ) excluded. [euro] billion

1 Wal-Mart 247 .6

2 Carrefour 69 .3

4 Metro AG 49 .4

5 Costco Wholesale 39 .6

9 Intermarche 33 .3

10 Auchan 31 .6 Table 1. Global sales of top 10 companies in supermarket retailing

In to attract more customers. managers of Tesco constantly consider the variety of products offered and new markets in which the company could start offering its products. They constantly check for new products which can be needed by customers. Tesco has also got involved in the e-commerce business due to its increasing importance in the world. The website of the company has been designed in such a way that it immediately captures the attention of audience. There are many services which Tesco offers online. Both tesco .com and Tesco Personal Finance demonstrate our ability to extend the Tesco brand. We have also expanded our telecoms offer by launching Tesco Mobile in partnership with O2 and our Home Phone service (Business Strategy. Retrieved on April 20th from source. HYPERLINK "http /www .tesco .com http /www .tesco .com

Tesco managers do their best to ensure all of the activities of the company follow its strategic objective. The strategy of the company deals with the customers for the most part. According to the company 's vision. what really matters is not the amount of profits but the devotion and loyalty of customers. As long as the customers ' needs are satisfied. they will keep returning to Tesco. Therefore. the following strategic goal has been established by the managers of the company Creating value for customers. to earn their lifetime loyalty (Business Strategy. Retrieved on April 20th from source. HYPERLINK "http /www .tesco .com " http /www .tesco .com

In to follow the central objective. Tesco management has established many principles which need to be followed for the company to work efficiently. The following principles need to be followed by employees. understand customers better than anyone be energetic. be innovative and be first for customers use our strengths to deliver unbeatable values to our customers look after our people so they can look after our customers (Business Strategy. Retrieved on April 20th from source. HYPERLINK "http /www .tesco .com " http /www .tesco .com

Tesco management has also applied the principle of Kant 's categorical imperative in the development of its business strategy- to treat others the way they would like to get treated themselves. This type of business strategy is the most efficient because it increases the performance of the company. In to answer these strict requirements. Tesco has employed the following principles. all retailers. there 's one team .The Tesco Team trust and respect each other strive to do our very best give support to each other and praise more than criticize ask more than tell and share knowledge so that it can be used enjoy work. celebrate success and learn from experience (Business Strategy Retrieved on April 20th from source. HYPERLINK "http /www .tesco .com http /www .tesco .com

The mentioned principles are efficiently applied in the company only due to the efforts of management. Tesco managers do their best to monitor not only the performance of the employees but the attitude to work which they have. In Tesco. all of the efforts are devoted to understanding of the customers. their psychology. their needs. their interests. The managers of Tesco have devoted their lives to the goal of satisfying their customers

The company has attracted many investors by their efficient system of planning and control. It is very important for the investors into the company to be sure about the stability and profitability of their investments. Tesco well-balanced strategy has attracted many investors The most important of them are represented in table 2

Fund Manager Current Rank at 01 /04 /2005

Barclays Global Investors 1 4 .46

Legal and General 2 3 .81

Axa Investment Managers 3 2 .89

Schroder Investment Management Limited 4 2 .81

State Street Global Advisors 5 2 .76

Threadneedle Investments 6 2 .38

Morley Fund Management 7 2 .06

M G Investment Management Limited 8 1 .98

Scottish Widows 9 1 .92

Fidelity Investments 10 1 .78 Table 2. Major Shareholders

The dividend policy of the company is very favourable for the shareholders. As the data of figure 2 shows. the dividends in 2004 increased in comparison with the dividends in 2000 by ?2 ,36 per ordinary share .Figure 2. Dividend policy in Tesco

Profits and sales of the company have been growing steadily during the last 4 years. as the data shows in figure 3. The sales and profits of the company are directly connected with the company 's ability to satisfy the needs of its customers. The obtained results of the company 's performance let us conclude that the management of the company has been very efficient in making the company profitable. The steady tendency of profits and sales increase is in many ways determined by the quality of management .Figure 3. Tesco profits and sales

The most important function of management consists in applying the limited resources of the company in such a way that maximum performance is obtained. This task has been achieved by Tesco managers. Due to the efficient distribution of functions in the company. it has been performing at a high level. As Table 3 shows. the company has employed many managers and directors in to achieve maximum control and planning. The structure of the company contributes to the efficient management of resources. Tesco organizational structure is organic. that is why maximum adaptability and flexibility is achieved. The company 's managers maintain the effective allocation of equipment. financial and human resources. Through the creation of the optimal proportion of resources use. maximum performance is achieved. The company 's

Name of executor Title

HYPERLINK "http /84 .40 .10 .21 /companyInfo /boardofDirectors .asp ?section 1 " \l "biog biog " David Reid Non-Executive Chairman

HYPERLINK "http /84 .40 .10 .21 /companyInfo /boardofDirectors .asp ?section 1 " \l "biog biog " Rodney Chase Deputy Chairman

HYPERLINK "http /84 .40 .10 .21 /companyInfo /boardofDirectors .asp ?section 1 " \l "biog biog " Sir Terry Leahy Chief Executive

HYPERLINK "http /84 .40 .10 .21 /companyInfo /boardofDirectors .asp ?section 1 " \l "biog biog " Richard Brasher Commercial Trading Director

HYPERLINK "http /84 .40 .10 .21 /companyInfo /boardofDirectors .asp ?section 1 " \l "biog biog " Philip Clarke International IT Director

HYPERLINK "http /84 .40 .10 .21 /companyInfo /boardofDirectors .asp ?section 1 " \l "biog biog " Andrew Higginson Finance Strategy Director

HYPERLINK "http /84 .40 .10 .21 /companyInfo /boardofDirectors .asp ?section 1 " \l "biog biog " Tim Mason Marketing. E-commerce. Property and Republic of Ireland Director

HYPERLINK "http /84 .40 .10 .21 /companyInfo /boardofDirectors .asp ?section 1 " \l "biog biog " David Potts Retail Logistics Director

HYPERLINK "http /84 .40 .10 .21 /companyInfo /boardofDirectors .asp ?section 1 " \l "biog biog " Charles Allen CBE Non-Executive Director

HYPERLINK "http /84 .40 .10 .21 /companyInfo /boardofDirectors .asp ?section 1 " \l "biog biog " E Mervyn Davies Non-Executive Director

HYPERLINK "http /84 .40 .10 .21 /companyInfo /boardofDirectors .asp ?section 1 " \l "biog biog " Dr Harald Einsmann Non-Executive Director

HYPERLINK "http /84 .40 .10 .21 /companyInfo /boardofDirectors .asp ?section 1 " \l "biog biog " Ken Hydon Non-Executive Director

HYPERLINK "http /84 .40 .10 .21 /companyInfo /boardofDirectors .asp ?section 1 " \l "biog biog " Veronique Morali Non-Executive Director

HYPERLINK "http /84 .40 .10 .21 /companyInfo /boardofDirectors .asp ?section 1 " \l "biog biog " Graham Pimlott Non-Executive Director

HYPERLINK "http /84 .40 .10 .21 /companyInfo /boardofDirectors .asp ?section 1 " \l "biog biog " Lucy Neville-Rolfe Company Secretary

Table 3. Tesco top executives

managers prepare budgets very carefully. and there are many employees participating in the budget creation due to its importance. The process of recruitment is also well-developed in the company. and recruitment managers help to maintain the high level of employees ' skills by employing only the best professionals

Tesco management pays very serious attention to the facilities of the company. particularly the buildings in which supermarkets are located and their convenience for customers. as well as adequate decoration. In to increase sales. Tesco management has applied many tools. First of all. the number of stores in different countries has been increased and many more stores are planned in the following years (Table 4. It is very important for the company to open more stores because in such a way its share in the countries ' markets will increase

of stores Sales area New stores opened inc. acquisitions

in 2002 /03 Planned

UNITED KINGDOM 1 ,982 21 .8m sq ft 1 ,265 59

REPUBLIC OF IRELAND 77 1 .7m sq ft 1 6

HUNGARY 53 2 .5m sq ft 5 5

POLAND 66 3 .4m sq ft 20 5

CZECH REPUBLIC 17 1 .6m sq ft 2 4

SLOVAKIA 17 1 .4m sq ft 4 4

THAILAND 52 4 .8m sq ft 17 6

SOUTH KOREA 21 2 .1m sq ft 7 8

TAIWAN 3 0 .3m sq ft 1 1

MALAYSIA 3 0 .3m sq ft 3 1

Table 4. Tesco Stores

One of the major current competitors which Tesco has is Sainsbury. but due to the efficient allocation of resources. Tesco has won the battle TESCO has won the store wars. toppling Sainsbury 's from the number one spot after 10 years. The supermarket rang up pounds 13 .8 billion last year putting it pounds 400million ahead of Sainsbury 's (Kevan. 1998 br

2. The reason of this victory can be found in efficient pricing and consumer-oriented strategy applied by the company. Tesco managers combined high quality of products which attracts customers with relevant prices. and this increased the sales. Besides. innovation schemes have been applied by Tesco managers. Robert Clark of Corporate Intelligence on Retailing said "Tesco has been growing much faster than Sainsbury 's Tesco stores are brighter. they 've got better ranges and their management has just been more innovative " He blamed Sainsbury 's bosses for losing touch with what shoppers want (Kevan. 1998 ,

Another reason of Tesco growing profitability is the quality of its human resources. The strategy of Tesco recruitment consists in employing people with great skills and high potential and providing very favourable working conditions for them. One of the recent innovations applied by the management include profit-share schemes which enable employees to participate in the profits of the company. The company 's profit-share scheme. which is now the biggest of any private- sector UK company. is expected to pay out more than pounds 40 million in bonuses The 106 ,000 staff included in the scheme will receive an extra four per cent on top of their pay (Shilliogford. 1999 ,

This compensation policy is very efficient because it gives the employees an incentive to work better. They all realize that their small contribution into the company 's performance will be multiplied by the contributions of other employees. and they are going to participate in the obtained profits. This gives motivation to all of the employees to increase their own performance. Adrian Mann. 18. a stock controller at Tesco store in March. Cambridgeshire. says "The profit-share makes you feel more needed and you benefit if the company does well (Shillingford. 1999 ,

46. In addition to the mentioned feature of the compensation policy. employees are also able to receive a large part of salary in bonuses judging from their performance. Managers. as well as other employees. receive adequate compensation according to this plan A manager of a large Tesco store earning about pounds 45 ,000 can expect an extra pounds 1 ,800. while a checkout girl or boy on pounds 9 ,000- pounds 10 ,000 a year should get about pounds 400. Bonuses for senior managers are capped at pounds 8 ,000 (Shillingford. 1999 br

The managers of the company also contribute to its efficient performance due to their good leadership and communication skills. Tesco managers hardly ever apply directive leadership styles due to its inefficiency in the constantly changing environment. It is often impossible for the manager to give exact tasks when the environment might change. and this policy will be inefficient. The company 's managers often practice supporting leadership style. They usually practice the policy of employees ' empowerment. Employees are able to make their own decisions and thus their performance can increase rapidly. Tesco managers also create friendly atmosphere in the company which prevents conflicts in the workplace from happening. Due to this well-balanced policy. the employees ' performance in the company is always on a high level

It is also necessary to note that Tesco is good example of the change management strategy implementation. The company 's leaders have noted a long time ago that change management is particularly important for the company 's success. In to achieve maximum performance. all of the company 's objectives are constantly re-considered according to the new requirements of the environment. The strategic goal of the company does not undergo any changes because it serves as a building clock for the company. All of its activities are based on it. However. short-term objectives can be adjusted according to the changing environment. Tesco management provides detailed analysis of the current market situation and particularly the strategies of competitors in the market. Before any plans in the company are adopted. the management analyses the current conditions in the market. The conditions are constantly changing. For example. the interests and needs of the consumers can change because new products will be introduced. Besides. some major events can happen in the market which will also influence the interests of consumers. For example. the situation in the country can get worse and due to the limited incomes. consumers will be buying only cheap products. However an opposite situation can occur in the market. The boom in economy will enable the consumers to buy more goods than ever. so they will need a larger variety of goods in the store

The activities which are provided by Tesco managers serve the interests of the company 's strategic goal. All of the steps which the company takes are channelled to the development of the consumers ' loyalty to the supermarket. As the obtained data shows. the management has been very efficient in implementing of the company 's strategic goal in the recent years

Boehm Rodger. Phipps Cody. Flatness Forays. The McKinsey Quarterly Issue. 3. Publication Year. 1996

Business Strategy. Retrieved on April 20th from source. HYPERLINK "http /www .tesco .com " http /www .tesco .com

Child Peter N. Taking Tesco Global. David Reid. Deputy Chairman of the United Kingdom 's Largest Grocer. Explains the Company 's International Strategy. The McKinsey Quarterly. Publication Year. 2002

Deal. T. and Kennedy. A. Corporate Cultures. London. Penguin Books 1988

Guarrero. C. The Leadership Challenge. Security Management. Vol. 42 October 1998

Keers Helena. Tesco Sets Up Shop in Japan with Pounds 139m Offer for Retailer. Daily Telegraph. Publication Date. June 11. 2003

Reilly Kevan. NO1 TESCO PROVES SMALL IS BIGGEST High Street Strategy Topples Arch Rival Sainsbury 's. The Mirror. Publication Date. May 5 1998

Shillingford Joia TESCO STAFF CASH IN WITH Pounds 40m BONUSES. Sunday Mirror. Publication Date. April 11. 1999

Tesco Takes a Chance on 'Difficult ' Japanese Market. The Journal Publication Date. June 11. 2003

TESCO WELCOMES BUDGET MOVE ON BIO-DIESEL. IMMEDIATE RELEASE. Wednesday March 17. 2004. Retrieved on April 20th from source. HYPERLINK "http /www .tesco .com " http /www .tesco .com

Business and Management.

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