Nominee director is a person who is officially chosen in a company to ensure high quality of corporate governance and to ensure that all business affairs are conducted in accordance with the company's regulations. He or she is an affiliated director whose task is to ensure proper and effective protection of the interests in the represented institution (A.C. Fernando 2012, s. 192).
Boards of Directors consists of inside and outside directors. Nominee director is one of three types of outside directors. These directors have a legally considered significant share in the company's capital or they perform this function because of their shareholder status. They represent also significant shareholders. One of them may also be director of the parent company or senior executive (G. Stein, S. Plaza 2011, s. 2).
Theoretical background of nominee director
The theoretical approach to the meaning of nominee director in the organization can be divided according to two points of view: Classical view and Liberal Theory.
The most important goal of corporate governance is to determine the direction and performance of the company. Its main participants are:
- the shareholders,
- the management,
- the board of directors,
- other participants (the customers, suppliers, employees, creditors and the community).
The activity of directors and managers (especially in the area of jurisdiction) is determined by a special law code which is called Statutes governing Companies. The law for nominee directors is restrictive, because according to it they are on the same level as normal directors, which means that everyone has the same duties. They should be guided by their Duty of Loyalty, by representing the company and taking care of its interests. At the same time, they should not engage in activities that are contrary to the interests of the company. Rights and obligations of the company director are defined in articles of association and in the memorandum.
The role of nominee directorship is enhanced in liberal point of view, through the continuous development of management structures. The theory has been strengthened by the need for greater supervision over the company's affairs and increase the number of directors. Nominee directorship have an accepting in Canada and Australia. Under this theory, nominee directors have a special role which is different from the role of a normal director.
Liberal Theory introduces a fresh look at the role of nominee director. Considering the corporate primacy, it is possible to act in accordance with the interests of the company and the director. However, the company's interest is the most important, so if both can not be reconciled, the company's interest must win. The second principle of this approach (Attenuated Duty Approach) is that private regulations are acceptable in the form of a formal weakening of duties for the nominee director (Kahoro M. M. 2017, s. 15-16).
- Ahern D. (2011), Nominee Directors’ Duty to Promote the Success of the Company: Commercial Pragmatism and Legal Orthodoxy, Sweet & Maxwell, London
- Fernando A. C. (2012), Corporate Governance: Principles, Polices and Practices, Dorling Kindersley, India, s. 192
- Kahoro M. M. (2017), Nominee directorship in Kenya, an examination of a more liberal approach, Strathmore University, s. 15-16
- Steger U., Nedopil Ch. (2014), The Incredible Adventures of Carla. Practical Guide for Nominee Directors, International Finance Corporation, Washington
- Stein G., Plaza S. (2011), The role of the independent director in CEO supervision and turnover, IESE Business School, s. 2
Author: Dominika Magusiak