Are our directors truly independent? The question boards don’t ask enough.
There's a version of board independence that looks good on paper — the right number of non-executives, tick-boxes on the governance report, a balanced skills matrix that impresses the regulators.
And then there's the real thing.
The difference matters enormously. And most boards aren't honest enough with themselves about which version they have.
The Executive Director’s Conundrum - Two Hats. One Head.
The role of the executive director is often the most misunderstood dynamic in any boardroom.
An executive director holds a dual role by definition. Monday through Friday, they're the CEO, the CFO, the COO — running the business, managing teams, fighting quarterly fires, protecting their turf. Then they walk into the boardroom and are expected to be a director. To step back. To oversee. To challenge. To hold themselves and their colleagues to account.
That's not a minor mental adjustment. That's a full identity shift.
Being an executive director creates a duality because the executive director is keeping one eye and both hands on managing the day-to-day of the company while keeping the other eye on the future and setting the strategy that moves the company forward. Too much focus on one role can come at the expense of the other.
The executive director brings something genuinely valuable to the boardroom — deep operational knowledge, real-time business intelligence, and the credibility that comes from actually running things. A non-executive, however brilliant, can sometimes be sold a story. The executive director knows when the numbers don't add up, when a project is in trouble, or when management is painting a pretty picture to distract from the mess that is festering beneath the surface.
An executive director’s intimate knowledge of the business can be exactly what compromises their independence.
When a CEO sitting as a director is asked to evaluate the performance of the management team, they are essentially evaluating themselves. A CFO is asked to assess financial reporting integrity, when they have approved the financial reports. The hat-switching problem isn't just theoretical — it requires active, conscious discipline every time a board meeting is called to order.
The question every executive director should ask themselves before each board meeting isn't "What does my department need?" It's "What does the company need — and am I the right person to say it objectively?"
It’s a tough, searching question that most executive directors don't ask themselves nearly often enough.
What Does "Independent" Actually Mean?
Here's where governance frameworks get more precise, even if the boardroom doesn't always follow suit.
A non-executive director (NED) is not employed by the company and is not involved in day-to-day management. They bring an external perspective — oversight, challenge, and strategic counsel without operational skin in the game. But "non-executive" and "independent" are not the same thing.
An independent non-executive director takes it further. According to the Corporate Governance Institute, an independent director "has no financial interest in [the company]" and provides "a valuable, impartial perspective to corporate decision-making and oversight."
What can erode that independence? More than most boards acknowledge:
Long tenure. Most governance codes suggest reviewing independence after 8–10 years. Familiarity breeds deference, not objectivity.
Social relationships. A director who golfs with the CEO every Saturday isn't going to challenge them the same way a stranger would.
Financial ties. Consulting relationships, supplier connections, investment stakes — all of these create pulls that tug at independence without necessarily breaching a bright-line rule.
Cross-directorships. Sitting on each other's boards creates a web of mutual obligations that can quietly undermine the willingness to challenge.
The UK Corporate Governance Code gives a concrete framework for assessing independence, and it remains one of the better references globally, even for companies operating in other jurisdictions. The framework includes whether the director:
is or has been an employee of the company or group within the last five years;
has, or has had within the last three years, a material business relationship with the company, either directly or as a partner, shareholder, director or senior employee of a body that has such a relationship with the company;
has received or receives additional remuneration from the company apart from a director’s fee, participates in the company’s share option or a performance-related pay scheme, or is a member of the company’s pension scheme;
has close family ties with any of the company’s advisers, directors or senior employees;
holds cross-directorships or has significant links with other directors through involvement in other companies or bodies;
represents a significant shareholder; or
has served on the board for more than nine years from the date of their first appointment.
The point isn't that any of these factors automatically disqualifies a director. It's that they need to be acknowledged, examined, and managed — not glossed over because the person in question is smart, well-connected, or simply convenient.
The Other Side: Why You Still Need Executives in the Room
This isn't an argument for boards composed entirely of outsiders.
A board with no executive representation can quickly become disconnected from operational reality. Non-executives who haven't run businesses can be fed polished presentations and leave the boardroom none the wiser. Strategy that sounds brilliant in theory can be signed off without anyone at the table who knows it can't actually be executed.
As the Corporate Governance Institute notes: "EDs are the engine room, driving operations and strategy. NEDs are the navigators, offering oversight, independent thinking, and wise advice. When you get this relationship right — especially with a balanced board composition — you get better decisions, clearer accountability, and more transparency."
The goal isn't to exclude executive perspectives. It's to ensure that when executive directors are in the room, they are genuinely wearing the director hat — not defending their team's record, not managing upward, not protecting their own position.
That distinction is harder to enforce than any governance code can mandate. It requires personal discipline, board culture, and the kind of honest self-awareness that good directors build over time.
Why It Matters: The Boards That Forgot Their Job
Two cases that every director should know by heart:
Enron (2001).
This wasn't a case of an incompetent board. The U.S. Senate Permanent Subcommittee on Investigations found that Enron's board included experienced businesspeople and finance experts. And yet — they approved one person to act both as CFO of Enron and manager of the private equity funds that were doing business with Enron. They signed off on billions in off-balance-sheet activity. They allowed conflicts of interest to sit in plain sight, unmanaged and undisclosed.
The problem wasn't ignorance. It was proximity. Directors too close to management, too deferential to the executive team, too satisfied with the answers they were given. As one analysis put it, the board failed either through knowing complicity or through a catastrophic abdication of their oversight duty. Neither option is acceptable!
Boeing (2018–2019).
The Delaware Chancery Court found that not a single Boeing board committee had been assigned responsibility for airplane safety oversight. Not one. Every committee charter was silent on the subject. The board was not even aware a Safety Review Board existed — until after the 737 MAX had been grounded following two crashes that killed 346 people.
The Boeing board settled the resulting shareholder lawsuit for over $237 million— the largest Caremark settlement ever — and was required to appoint a director with airplane safety expertise and an independent ombudsman. The board had focused on production targets and profit while the company's core product was failing..
This is what happens when boards are nominally independent but not functionally independent. The title on the governance report means nothing if the culture around the table prevents anyone from asking the inconvenient question.
Practical Tests for Real Independence
For directors sitting on a board — or chairing one — here are questions worth asking honestly:
Do the independent directors have access to external advisors, auditors, and legal counsel independently of management? If every piece of information flows through the executive team, independence is theoretical at best.
Is the CEO and Chair role separated? Splitting these roles is widely accepted best practice precisely because concentrating both in one person limits effective challenge. The Corporate Governance Institute is clear: "corporate governance best practices often recommend separating the roles of CEO and chairperson — to prevent one individual from having too much control."
When was the last time a director challenged a significant executive recommendation — and won? A board where the answer is "never" isn't a board. It's a ratification committee.
Do the executive directors genuinely shift perspective when they enter the boardroom? Or are they still the CEO when the agenda turns to executive performance?
Do the executive directors interrogate the management information placed before the board to ensure executive accountability? The ability to parse through vague executive jargon and information overload to identify inconsistencies, inaccuracies and issues for escalation is just one of the benefits of having executives on the board.
Do some directors stay quiet in meetings but express dissenting views once the meeting is adjourned? There may be an apparent constraint on the independence of those directors or they are conflict-avoidant. Either way, the board loses an opportunity to benefit from a different point of view.
The Bottom Line
Independence isn't a credential. It's a posture. And it requires daily maintenance and regular self-assessment.
Executive directors can be enormously valuable — but only if they're honest about the limits of their independence and proactively manage those limits. Non-executive directors can lose their independence gradually, through tenure, relationships, and deference, without ever noticing it happening.
The boards that serve their companies well are the ones that conduct this self assessment openly, regularly, and without waiting for a crisis to force the conversation.
Because by the time the crisis arrives, the independence that was needed was already gone.
