The composition of a board of directors will determine the quality of a company’s decision-making. There are two types of director: the independent director, who has no direct financial ties with the company, and the shareholder director, who owns shares in the company. There are advantages and considerations specific to each profile.
To discuss this topic, we interviewed Philippe Vignon, Independent Director at APIA Swiss.
Independent director :
An independent director, as Philippe Vignon points out, is characterized by his or her lack of direct shareholding in the company. This financial independence enables him/her to take an objective view of the company’s challenges, offering unbiased advice. Its value lies in its ability to challenge operational management, often shareholders themselves, while avoiding potential conflicts of interest linked to shareholding.
Director and shareholder :
On the other hand, the shareholder director has a direct link with the company’s capital. This financial link can bring a stronger emotional commitment to the company’s success. However, this can also introduce potential biases into decision-making, as personal interests can sometimes conflict with the company’s general interest. The question of bias may arise, as shareholder-directors may be inclined to favor decisions that benefit their portfolio rather than the company as a whole.
Benefits and considerations :
The independent director brings an external perspective, emphasizing neutrality and objectivity. Its role as a neutral advisor is particularly valuable at delicate moments when objective, strategic decisions are required. On the other hand, the shareholder director may be motivated by a stronger loyalty and emotional investment in the company, which can stimulate innovation and commitment, but can also introduce challenges related to conflicts of interest.
Managing conflicts of interest :
Managing conflicts of interest is a key difference between the two profiles. The independent director is in a better position to avoid these conflicts and maintain a benevolent neutrality. On the other hand, shareholder directors must be aware of the implications of their decisions on their own investments.
Ultimately, the independent director supports the shareholder directors and complements their existing skills. It’s a plus for the company to call on an outsider, and it enables the Board of Directors to make informed decisions that promote the company’s long-term growth and sustainability. It’s not one or the other, but together that these two profiles are most effective.
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APIA Swiss Team