2.4.3 Unaffiliated professional model

The third type of definitions require directors to be professionals that are ‘(i) experts in their fields (which should assist the corporation in the conduct of its business); (ii) knowledgeable about critical aspects of the corporation’s operations; and (iii) skilful in serving as competent, alert overseers and advisers of management’ (Koppes et al. 1999: 1054). Gilson and Kraakman (1991: 884-892) give the characteristics of such a professional director. This model assumes that normal NEDs are often selected by management, which leads to social and ideological ties to management. Apart from that, they lack the required time to monitor management effectively, due to the fact that they serve as CEO or executive director of the board of another company or hold another demanding position. The unaffiliated professional director does not suffer from these drawbacks, because he only serves on boards as NED to monitor management on behalf of the shareholders. All his time is occupied by fulfilling positions in multiple boards as NED, which are all of equal importance. He is therefore able to devote all his professional time to monitoring the management of the boards he serves on. When necessary, he can shift his attention to the company that needs it most. In this case, he is not constrained by a full-time position in another organisation. In addition, serving on multiple boards ensures that he is financially independent of management or the whole company. An example of how this can be worked out is to establish a non-profit organisation, financed by institutional investors and that recruits and educates directors and mediates in filling in NED positions. These ‘professional directors are a public good for investors. All investors would benefit from the services of these directors, yet no single investors could obtain their services without at least some cooperation from other shareholders’ (Gilson and Kraakman 1991: 886). Institutional investors have to act in conjunction to elect an unaffiliated professional director to the board, which prevents a director from representing a single shareholder. The risk of this model is that the interests of minority shareholders are harmed, because these directors are appointed by institutional investors who might have interests that diverge from those of minority shareholders (Harvard Law Review Note 2006).