Independence of Non-Executive Directors in Public Limited Companies in Malawi

Abstract

The role of Non-executive directors in public limited companies has been gaining eminence in the global perspective. Non-executive directors are seen as counter-balancing elements to the immerse powers of the executive directors who have long been accused of abusing their vested powers for their own benefits thereby bringing issues of agency costs.Malawi Stock Exchange – the sole capital market in Malawi, adopted The Code of Best Practice for Corporate Governance in Malawi based on Cadbury Report (1992) formulated by public and private groups led by Society of Accountants in Malawi in 2001. Subsequent codes developed in Malawi in 2010 and 2011 mirrored Higgs Report (2003) and Combined Code (2003) on the roles and independence of the Non-executive directors. Consequently, Malawian listed companies provide full disclosure on the roles and independence of their Non-executive directors.Findings in this study however depict that a substantial number of Non-executive directors are not independent emanating from conflict of interest as a result of significant shareholding in companies they represent, interlocking directorships and longevity in their current directorship. The debacle of this matter is that some Non-executive directors are too powerful such that Corporate Governance Principles alone cannot resolve current deficiencies in the independence of Non-executive directors. The capital market regulators should explore issuing strong directives or seek statutory provisions to redress current gaps in the roles and independence of Non-executive directors.