Question 2

　　(a) (i) The effectiveness of non-executive directors may be limited by the following

　　factors:

　　Having the same perspective as executive directors

　　The corporate governance reports stress the importance of non-executive directors possessing independent judgment and being appointed by a nomination committee. However the nomination committee may restrict its search to directors who will ‘fit in ’ with the rest of the board, and may be unwilling to recruit from a diversity of backgrounds, for example stakeholders such as employees.

　　In addition many non-executive directors will only agree to serve on the boards of companies if they admire the company’s chairman or its way of operating.

　　Lack of Independence

　　In many companies non-executive directors have been appointed through business or social contacts with directors. It may be difficult to find non-executive directors who

　　fulfil the independence requirements of the corporate governance reports or

　　freedom from any relationship that compromises independence.