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Cayman Island Directors Sitting on Multiple Boards
The Financial Times reported recently that a small group of Cayman Islands “jumbo directors” are sitting on the boards of hundreds of hedge funds as demand for independent directors booms in the Caribbean tax haven.
At least four individuals hold more than 100 non-executive directorships each, and 14 have more than 70 – each worth as much as $30,000 a year. One has been listed as on the boards of 567 Cayman entities, almost all of which were hedge funds.
The revelation of the figures, in a Financial Times investigation, comes amid calls from some of the world’s leading hedge fund investors for greater transparency in the Caymans as part of a global effort to improve fund governance. This means that many individuals are searching for a way to make Cayman based board of directors document which and how many boards they serve on. At this point in time, the Cayman Islands Monetary Authority does not disclose that information.
Responding to reports that directors in the Cayman Islands are sitting on multiple boards, Professor Meziane Lasfer of Cass Business School (http://www.cass.city.ac.uk/
“Reports that some non-executive hedge fund directors in the Cayman Islands are sitting on more than 100 boards each is a concerning revelation for investors. By holding so many jobs, it is a fantasy for any director to think they can perform their fundamental duty of protecting investor interests.
“Firstly, the directors are unable to accomplish the crucial monitoring role they should play in ensuring funds are performing well and generating good returns for investors. Secondly, the directors cannot properly fulfil the duty they have to advise managers on the fund’s investment decisions.
“These activities can only be accomplished by being present and active at the board meetings. Empirical evidence shows that companies hold, on average, 11 meetings per year. If each of the meetings lasts one day, non-executive directors can attend only about 33 meetings a years, assuming that these board meetings do not clash. If they sit on 100 boards, they will have to miss 67 meetings, begging the question why these directors are being paid for doing nothing.
“All of this results in a weak and inefficient board, in which managers have a free-ride in decision-making and risk-taking, and investors are left worryingly exposed.”
To speak to Professor Meziane Lasfer please contact Chris Johnson, Press Officer at Cass Business School. Professor Lasfer teaches Corporate Finance, Financial Analysis, Research Project Management and Financial Economics to MBA, (http://www.cass.city.ac.uk/
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Cass Business School is one of Europe’s leading providers of business and management education, consultancy and research.