1. December 2006 The Search for Independence….. CG Mena Workshop 2: Developing Codes – Content and Consultation William Foster

2. Traditional Public Company Abuses self-dealing by directors, unequal treatment of shareholders, failure to protect minority interests, and lack of transparency of the conduct of directors and senior managers. Independent Directors Add value by providing: Objectivity Investor and Shareholder confidence Accountability, and Stewardship William Foster 2 Executive and related Directors may be able to act as Independents, but are less likely to when it matters. December 2006

3. Independence William Foster 3 Best Developed market Practice Responsibility on Issuer Simple “spirit” definitions requiring judgement Possible guidelines Disclosure requirement Best Developing Market practice Responsibility on Regulator Strict “fact” definitions Disclosure requirement “Independent” means self-reliant, with objectivity unimpaired by other interests. “Executive Director” means a director who is also an employee of the company. “Independent Member” means a director who: has not held, or whose Immediate Family members have not held, during the last three years, a key position in the Company, such as CEO, general manager, or any immediate subordinate position; has not, and his Immediate Family members have not, during the last three years had any substantial financial dealings with the Company; does not receive or has not received, in the last three years, additional remuneration or payments from the Company apart from a director’s fee not linked to the Company's performance or share price; is not or has not been during the last three years a director, partner or employee of a firm which is the Company’s auditor; does not represent a Significant Shareholder or a group of individuals and/or entities that collectively may act as a Significant Shareholder; does not hold cross directorships or has no significant links with other directors through involvement in other companies or bodies; has no personal service contracts with the Company, its Related Parties or its executive management; or is not affiliated with a significant customer or supplier of the Company or its Related Parties. “Executive Director” means a director involved in the day to day management and/or in the full time employment of the Company, and/or any of its subsidiaries; December 2006 e.g. Clear Detailed Unambiguous Provides Guidance Conceptual and Simple

4. Application Practical Choices for implementation….. Mandate Independent and/or non-executive Directors and relax the definitions, or Provide clear and unambiguous definitions and make best practice Board composition voluntary (but rewarded) What would you choose? 4 William Foster December 2006