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The appointment process of independent directors in Malaysian listed companies

This study examines the appointment process for independent directors in public listed companies (PLCs) in Malaysia. To this end, open-ended interviews were conducted with chairmen of nomination committees of PLCs in Malaysia in order to understand the appointment process. The results revealed th...

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Main Authors: Abdullah, Shamsul Nahar, Zainal Abidin, Nor Hafizah, Abu Bakar, Intan Suryani, Ur Rahman, Anis
Format: Article
Language:English
Published: Virtus Interpress 2016
Subjects:
HG Finance
Online Access:http://irep.iium.edu.my/61510/7/61510_the%20appointment%20process%20of%20independent_article.pdf
http://irep.iium.edu.my/61510/
https://www.virtusinterpress.org/THE-APPOINTMENT-PROCESS-FOR.html
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spelling my.iium.irep.615102023-07-13T07:08:00Z http://irep.iium.edu.my/61510/ The appointment process of independent directors in Malaysian listed companies Abdullah, Shamsul Nahar Zainal Abidin, Nor Hafizah Abu Bakar, Intan Suryani Ur Rahman, Anis HG Finance This study examines the appointment process for independent directors in public listed companies (PLCs) in Malaysia. To this end, open-ended interviews were conducted with chairmen of nomination committees of PLCs in Malaysia in order to understand the appointment process. The results revealed that nominations may come from various sources, including from the firm’s board members, CEO or owners. It was also found that the nominees are those within the personal network of the board members, CEO or owners. The main reason given was to shorten the appointment process and also because they knew the candidates personally. In terms of the selection criteria, the personal qualities of a candidate were found to be very important. In particular, the board puts emphasis on experience, expertise, professional qualifications, and reputation to identify a candidate who can commit to their tasks. However, the board does not consider race, religion, and gender as important selection criteria. Our findings reveal that it is the board that makes the final decision on the appointment or reappointment of independent directors. Based on our findings, we conclude that nominations for independent directorships mainly come from inside the firms and those nominated are within their networks. In other words, the independent directors are known or connected either to the board members, CEO or major shareholders. Hence, it would be very difficult for independent directors to perform a monitoring role as prescribed in agency theory. Rather, the independent directors are appointed to the board primarily to play a service role, consistent with resource dependency theory. The fact that firms prefer professionals with experience indicates that candidates for independent directorships are appointed because of their expertise and their service role. Virtus Interpress 2016 Article PeerReviewed application/pdf en http://irep.iium.edu.my/61510/7/61510_the%20appointment%20process%20of%20independent_article.pdf Abdullah, Shamsul Nahar and Zainal Abidin, Nor Hafizah and Abu Bakar, Intan Suryani and Ur Rahman, Anis (2016) The appointment process of independent directors in Malaysian listed companies. Corporate Ownership and Control, 14 (1). pp. 519-531. ISSN 1727-9232 E-ISSN 1810-3057 https://www.virtusinterpress.org/THE-APPOINTMENT-PROCESS-FOR.html 10.22495/cocv14i1c3p12
institution Universiti Islam Antarabangsa Malaysia
building IIUM Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider International Islamic University Malaysia
content_source IIUM Repository (IREP)
url_provider http://irep.iium.edu.my/
language English
topic HG Finance
spellingShingle HG Finance
Abdullah, Shamsul Nahar
Zainal Abidin, Nor Hafizah
Abu Bakar, Intan Suryani
Ur Rahman, Anis
The appointment process of independent directors in Malaysian listed companies
description This study examines the appointment process for independent directors in public listed companies (PLCs) in Malaysia. To this end, open-ended interviews were conducted with chairmen of nomination committees of PLCs in Malaysia in order to understand the appointment process. The results revealed that nominations may come from various sources, including from the firm’s board members, CEO or owners. It was also found that the nominees are those within the personal network of the board members, CEO or owners. The main reason given was to shorten the appointment process and also because they knew the candidates personally. In terms of the selection criteria, the personal qualities of a candidate were found to be very important. In particular, the board puts emphasis on experience, expertise, professional qualifications, and reputation to identify a candidate who can commit to their tasks. However, the board does not consider race, religion, and gender as important selection criteria. Our findings reveal that it is the board that makes the final decision on the appointment or reappointment of independent directors. Based on our findings, we conclude that nominations for independent directorships mainly come from inside the firms and those nominated are within their networks. In other words, the independent directors are known or connected either to the board members, CEO or major shareholders. Hence, it would be very difficult for independent directors to perform a monitoring role as prescribed in agency theory. Rather, the independent directors are appointed to the board primarily to play a service role, consistent with resource dependency theory. The fact that firms prefer professionals with experience indicates that candidates for independent directorships are appointed because of their expertise and their service role.
format Article
author Abdullah, Shamsul Nahar
Zainal Abidin, Nor Hafizah
Abu Bakar, Intan Suryani
Ur Rahman, Anis
author_facet Abdullah, Shamsul Nahar
Zainal Abidin, Nor Hafizah
Abu Bakar, Intan Suryani
Ur Rahman, Anis
author_sort Abdullah, Shamsul Nahar
title The appointment process of independent directors in Malaysian listed companies
title_short The appointment process of independent directors in Malaysian listed companies
title_full The appointment process of independent directors in Malaysian listed companies
title_fullStr The appointment process of independent directors in Malaysian listed companies
title_full_unstemmed The appointment process of independent directors in Malaysian listed companies
title_sort appointment process of independent directors in malaysian listed companies
publisher Virtus Interpress
publishDate 2016
url http://irep.iium.edu.my/61510/7/61510_the%20appointment%20process%20of%20independent_article.pdf
http://irep.iium.edu.my/61510/
https://www.virtusinterpress.org/THE-APPOINTMENT-PROCESS-FOR.html
_version_ 1772810679229612032
score 13.211869

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