Board composition and independence are fundamental issues in corporate governance. Concentrated ownership structures and weak legal protection in Asia increase the importance of independent non-executive directors on corporate boards. In Asia, companies commonly have controlling shareholders who have the ability to control the nomination and election of directors to the board. Independent non-executive directors should have high ethical standards, with the ability to act objectively to ensure that minority shareholders’ rights are not expropriated. This study examines ways to ensure that so-called independent directors are, in fact, independent. The study includes a comparative analysis of the regulations and codes of corporate governance in Hong Kong, Singapore, India, and the Philippines. These countries were chosen because of their concentrated ownership structures in the listed equity markets and because their corporate governance regulations are at various stages of development and implementation. We identify four key areas for discussion and improvement: director nomination and appointment, the concept of independence, director training and qualification, and the number of independent directors on the board.

A note on the use of this report:

Terminology: This report uses the term ‘independent non-executive directors’ (INEDs) interchangeably with the term ‘independent directors’. Minority shareholders are defined as all ‘non-controlling shareholders’.

Case citations: The actual cases describing the practices of independent directors were gathered from published reports in major English-language newspapers and on websites, company announcements from the stock exchanges and company websites, and securities commission websites. Each case source is attributed in the footnotes; we have not contacted the companies involved in these cases.

Acknowledgments:The CFA Institute Centre thanks the individuals and institutions that participated in this report and respects their request to remain anonymous.