Care Preschool Ltd (CPL) runs several preschool centres in all the capital cities. The management of CPL is currently reviewing the structure of the board of directors and is keen to make sure then board is structured in line with best practice corporate governance principles. They are about to set up an audit committee and are unsure of the distinction between non-executive and independent directors, as they thought that they were the same thing. (a) Explain the difference between an independent director and a non-executive director. Provide two examples of relationships that would affect a director’s independent status. (b) Explain why this distinction is important in regard to the structure of audit committees.
Care Preschool Ltd (CPL) runs several preschool centres in all the capital cities. The management of CPL is currently reviewing the structure of the board of directors and is keen to make sure then board is structured in line with best practice corporate governance principles. They are about to set up an audit committee and are unsure of the distinction between non-executive and independent directors, as they thought that they were the same thing. (a) Explain the difference between an independent director and a non-executive director. Provide two examples of relationships that would affect a director’s independent status. (b) Explain why this distinction is important in regard to the structure of audit committees.
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