Board Composition, Structure and Independence in Australia's Largest Listed Companies
![handle is hein.journals/mulr21 and id is 156 raw text is: BOARD COMPOSITION, STRUCTURE AND
INDEPENDENCE IN AUSTRALIA'S LARGEST LISTED
COMPANIES *
G P STAPLEDONt AND JEFFREY LAWRENCEt
[In recent years, a number of bodies have made recommendations of 'best practice' in corporate
governance, particularly regarding the composition and structure of the board of directors. One of
the main proponents of good corporate governance in Australia has been the Australian Investment
Managers' Association ('AlMA ), which is the industry association representing Australia's major
institutional investors. This article examines the rationale for the corporate governance recommen-
dations made by AlMA and others. It also presents the results of a study of board composition and
structure in Australia's 100 largest listed companies as at mid-1995. The study found that less than
half of the sample companies conformed with two of the key recommendations of AIMA.]
CONTENTS
I In tro d u ctio n ........................................................................................................... 15 1
ii Reduction of Agency Costs Through Monitoring ................................................. 152
III Does Corporate Governance Affect Corporate Performance? ............................... 155
A U nited States Em pirical Studies ................................................................ 155
1 D irect Studies ............................................................................... 155
2 Indirect Studies ............................................................................. 156
B Q ualification and Conclusion .................................................................... 157
IV Factors Limiting the Effectiveness of Independent Directors ................................ 158
V Are Independent Directors Important for Reasons Other than Corporate
Perform an ce? ................................................................................. ... ........ 16 1
A Taking the Lead Where Potential Conflicts of Interest Arise .................... 161
1 T h eo ry ........................................................................................... 16 1
2 E m pirical E vidence ....................................................................... 163
B Legal Reasons for Independent Non-Executive Directors ........................ 165
C C o n clu sio n ................................................................................................ 16 7
VI Board Composition and Structure in Australia's Largest Listed Companies ........ 167
A Sam ple and M ethodology ......................................................................... 167
B R esu lts ....................................................................................................... 17 2
I Board Com position and Structure ................................................. 172
2 M ultiple D irectorships .................................................................. 175
VII The Relationship Between Firm Size and Board Composition/Structure .............. 179
V III C onclusion ............................................................................................................. 186
An earlier version of this article was presented at the Inaugural Conference of the Australian
Law and Economics Association, University of Melbourne, 1 June 1996; another version ap-
peared as a research report of the Centre for Corporate Law and Securities Regulation. The
authors thank the conference participants and others who have provided helpful comments and
criticisms.
BEc (Adel), LLB (Hons) (Adel), DPhil (Oxon); Barrister and Solicitor of the Supreme Court of
South Australia; Senior Lecturer in Law and Associate of the Centre for Corporate Law and
Securities Regulation, University of Melbourne; Consultant, Minter Ellison, Sydney.
: BCom (Melb), LLB (Hons) (Melb); Solicitor, Arthur Robinson & Hedderwicks, Perth;
Research Associate of the Centre for Corporate Law and Securities Regulation, University of
Melbourne.](ViewImageLocal?handle=hein.journals/mulr21&div=9&collection=journals&method=preview&ext=.png&size=3)
What Is HeinOnline?
Contact us for annual subscription options:
Already a HeinOnline Subscriber?
profiles profiles most
Board Composition, Structure and Independence in Australia's Largest Listed Companies
Contact us for annual subscription options:
Already a HeinOnline Subscriber?
profiles profiles most