Mertis and Demerits of Introducing Non-Shareholder Directors in the Governance of Ethiopian Share Companies
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Date
2014-04
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Addis Ababa University
Abstract
Share companies are practiced and operated in many sectors of the economy. They play
paramount role to satisfY the taste, demand and interest of human beings as well as to bring a
wide range of developments and structural transformations in a country. Their roles are also not
easily replaceable across places, economic statuses and political standings.
In Ethiopia, these days, the general public as well as the business community begins to come out
from kiosk mentality and engages in share companies which require cooperation and large
investment. The numbers of share companies which are being formed are dramatically increased.
They are also brought benefit to the people, the business community and the country in many
aspects. However, Ethiopian share companies are surrounded by many problems and their
relevance is not to the level expected. The Commercial Code and other relevant legislations
specify share companies to be managed by boards comprised of shareholder directors only. This
prevents share companies to be managed by qualified, skilled and professional independent,
stakeholders and non-executive non-shareholder directors. It also poses practical difficulty to
maintain and enhance sound corporate governance, values and performances of share companies
although there are scholars who argue that non-shareholders directors do negatively affect share
companies. Hence, the thesis tried to point out the legal as well as the practical problems; studied
different theories, research results, international documents and experiences of foreign countries;
and consequently assessed the merits and demerits that non-shareholder directors would bring to
Ethiopia share companies. Accordingly, the thesis recommended that non-shareholder directors
should be introduced in the governance of Ethiopian share companies to exploit the benefits
would be gained fully.
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Métis and Demerits of Introducing Non-Shareholder Directors