Understanding the Role of an Independent Director

Understanding the Role of an Independent Director

By Dr. Christopher Kolade

Anyone desirous of being an Independent Director in a corporation must, first and foremost, qualify to be a director on the board of a corporation. Directors, generally speaking, have the onerous responsibility of being loyal to the Corporation, act honestly and exercise the care, diligence and skill in their dealings on its behalf that a reasonable, prudent person would exercise in comparable circumstances. Directors should never put their personal interest ahead of the interest of the Corporation.

And when we talk about directors, we are talking about those who sit on the board of an organisation. It is the Board’s responsibility to direct the enterprise so that it achieves sustainable success. The Board’s main accountability, which is to maximize sustainable value for the shareholder/investor, is best achieved by ensuring that requirements of other stakeholders are met. This requires the Board to maintain a satisfactory balance in the management of stakeholder expectations.

What are those duties of a board? To review and approve corporate strategy, to ensure the timely availability of resources, to approve budgets and monitor performance, to ensure that the firm complies with statutes, to manage top appointments and succession, to ensure cost-effective management of corporate assets. The board should report to stakeholders as necessary and should be able to review its own performance.

For the board to be able to perform such duties, certain values are attached to it. These include, but not limited to, having an enriching external perspective , having a dimension of competent objectivity, carrying out a supportive criticism of Management , having an i nformed appraisal of the business , having a friendly ear in times of difficulty , being t he custodian of accountability and serving as t he moderator of conflicts of interest.

It is the Board’s responsibility to direct the enterprise so that it achieves sustainable success. Its accountability is to maximize sustainable value for the shareholder/investor. These can be best  achieved by ensuring that requirements of other stakeholders are met and it requires the Board to maintain a satisfactory balance in the management of stakeholder expectations.

The role of an Independent Director is to ensure that the consideration of issues by the Board takes due account of all relevant interests. He is to ensure that the Board keeps faith with best practice in corporate governance, take the lead in resolution of conflicts, Serve on Board committees dealing with directors’ remuneration and allied matters and promote the good reputation of the company with external interest groups.

Who then is an ideal director? Someone who is not a part of the Management and is free from any relationship that could interfere with the exercise of independent judgment as a Board member. He should have a demonstrable track record of success in business, and should, from the company’s viewpoint, has intellectual, financial and political autonomy, with a deserved reputation for open articulation of own views when required.