KUALA LUMPUR: Independent directors of public-listed companies should declare and not conceal the actual reasons for resigning from companies’ boards of directors so as to provide clarity and direction for stakeholders.

Co-director of Corporate Governance & Financial Reporting Centre (CGFRC) at the National University of Singapore, associate professor Mak Yuen Teen, said independent directors should not cite personal reasons for resigning as the actual reason could at times help to send an early warning that the company was headed in the wrong direction.

He said there were cases of independent directors in Singapore who raised the red flag with their resignations, claiming that they were not privileged to certain information by the companies’ management, resulting in them not being able to discharge their duties effectively.

“Sometimes independent directors feel that they are squeezed by the management and controlling shareholders. As such they do need more support from their regulators,” he said.

Mak was speaking at a plenary session on “The role of market players in influencing good CG practices amongst PLCs” at an event organised by the Minority Shareholder Watchdog Group in conjunction with the inaugural SC-Bursa Malaysia Corporate Governance Week 2009.

According to Mak, there have been proposals for stock exchanges to play a more active role in engaging with the independent directors who had resigned, adding that there were occasions where independent directors were forced out from the boards and had no avenues to turn to.

Touching on the long tenure of independent directors, he said while there were no rules on the maximum period to sit on the board in this region, the corporate governance codes in the United Kingdom barred independent directors to sit longer than nine years.

“Long tenure of independent directors has been raised as an issue by global investors. Probably after nine years, it is good there is someone else to come in to take a fresh look at the company,” said Mak, who is also the Watson Wyatt Worldwide regional research director (Asia Pacific).

Citing a quote from an industry player, he said nine years were optimum for independent directors as “first three years they are learning, next three years they are contributing, next three years they are bored.”

Meanwhile, Corston-Smith Asset Management (Singapore) Pte Ltd founder and managing director Shireen Muhiudeen said non-executive directors must play their roles and ensure that their views and objections were raised and minuted at board meetings.

“If nobody listens to you, at least get them minuted. If they don’t get minuted, then take a tape recorder in to record,” she said, drawing laughter from some 200 participants.

Bursa Malaysia Bhd chief regulatory officer Selvarany Rasiah said in general, the listing requirements in Asia focused on related party transactions as there were many interlocking of shareholdings and family interests in businesses which called for greater regulations on these transactions to protect investors.

This article appeared in The Edge Financial Daily, June 10, 2009.