Multiple Directorship
Issue of multiple directorships has recently came to public concern. It becomes more and more common that directors in listed companies retaining multiple directorships and even some legislators are involved. This situation is popular in Hong Kong and Singapore, however, many directors in United States are usually involved in one company only.
There are serval problems in exercising multiple directorships to listed companies. First, director may not meet his function diligently. With regard to the Non-statutory Guidelines on Directors Duties Principle 4 , a director of a company must exercise the care, skill and diligence that would be exercised by a reasonable person with the knowledge, skill and experience reasonably expected of a director in his position. It doubts that one can dedicate enough time to read documents and attend meetings for each company if he has multiple directorships. If he made any decisions that harm the company given that he did not read sufficient information and understnad the situation of the company, he is not act due care and skill as a director.
The Guidelines Principle 11 also sated that a director of a company must take all reasonable steps to ensure that proper books of account are kept so as to give a true and fair view of the state of affairs of the company and explain its transactions. As many companies follow similar accounting schedules, most common are setting year-end date as 30 April or 31 December, during the end of the accounting period, they have to review all the financail statements of the listed companies they directed in order to ensure there are no fraud. It doubts that they can review all the financail statements if he has directored over 20 listed companies. If there are frauds and mistakes in financial statements, it would affect the investors and shareholders who rely on the annual reports of the companies to make investment decisions.
Furthemore, directors may have conflicts of interests when he
There are serval problems in exercising multiple directorships to listed companies. First, director may not meet his function diligently. With regard to the Non-statutory Guidelines on Directors Duties Principle 4 , a director of a company must exercise the care, skill and diligence that would be exercised by a reasonable person with the knowledge, skill and experience reasonably expected of a director in his position. It doubts that one can dedicate enough time to read documents and attend meetings for each company if he has multiple directorships. If he made any decisions that harm the company given that he did not read sufficient information and understnad the situation of the company, he is not act due care and skill as a director.
The Guidelines Principle 11 also sated that a director of a company must take all reasonable steps to ensure that proper books of account are kept so as to give a true and fair view of the state of affairs of the company and explain its transactions. As many companies follow similar accounting schedules, most common are setting year-end date as 30 April or 31 December, during the end of the accounting period, they have to review all the financail statements of the listed companies they directed in order to ensure there are no fraud. It doubts that they can review all the financail statements if he has directored over 20 listed companies. If there are frauds and mistakes in financial statements, it would affect the investors and shareholders who rely on the annual reports of the companies to make investment decisions.
Furthemore, directors may have conflicts of interests when he
References: Cheung T. (2012). New business alliance top for directorships. South China Morning Post Editor (2011). Lawmakers should be strict with themselves. Ming Pao Lee J. (2009). Multi-tasking not a problem. The Business Times Stott V. (2011). Hong Kong Company Law 13th Edidioion. Longman Yiu E. (2011). Companies facing board juggling act. South China Morning Post Yiu E. (2012). Legislators’ director reoles raise concerns. South China Morning Post