I've often pondered the question posed in the subject line—not only from a personal perspective, but also from an independence/critical thinking perspective. This is a vexed topic, because many owners wish to occupy a seat in the boardroom themselves, either to influence company growth and development (a healthy motivation), or simply to keep an eye on their asset (not so good).
The key issues to be grappled with when considering the question are influence and independence. Will the holding of shares influence the director to make certain decisions differently than if they did not own shares? The owning of company shares (by directors) is probably advantageous to engagement and commitment—so long as independence in decision-making is preserved, and decisions are made in the best interests of the company. However, if the answer is "yes" or "maybe", then the best answer to the topic question is probably "no". Either the non-executive director should not own company shares, or if they wish to continue to own company shares, they should consider resigning their position.
The reasoning for my conclusion is as follows. Directors are required to act in the best interests of the company (in New Zealand, at least). In so doing, a primary task of a director is to make decisions. If a director was to make a different decision based on their ownership of shares, then clearly their decision-making is influenced (and potentially conflicted) by that ownership. Arguably, they are no longer acting in the company's best interests, but those of the shareholder, of which they are one. In such cases, the director is no longer meeting the legislative requirement. I wonder how many directors, particularly of smaller companies, inadvertently find themselves in this position?
Thoughts on corporate governance, strategy and boardcraft; our place in the world; and other topics that catch my attention.