July 2026. Bob Tricker. 

My blog in May 2026, on the independent director, hit a nerve among members of our corporate governance network. This new blog extends the discussion of the concept of director independence, which I now realise is more subtle than the corporate governance literature may have recognised.

The traditional view of independence for outside, non-executive directors is that they have no relationship that could affect the exercise of their independent judgement, which could affect unbiased oversight of executive management.  Although their intention is the same, the US rule-based and the UK voluntary-based regimes vary in detail.

 
The US rule-based view of director independence

In the US, the criteria for determining independence are laid down and strictly enforced by statute (federal law and state company law) and by SEC (Securities and Exchange Commission) regulations. Stock exchange listing rules also include demands for director independence. 

 Under the law, every listed company must ensure that each independent director has no material relationship with the company, either directly or as a partner, shareholder, or officer of an organisation that has a relationship with the company. This involves an assessment based on the context.
 The New York Stock Exchange (NYSE) and Nasdaq place specific objective requirements for independence. The NYSE, in what it calls ‘bright-line‘ requirements includes: 

 

• employment: the director cannot be an employee of the company, nor can a family member be an executive officer
• director remuneration: the director cannot receive more than $120,000 a year in direct compensation from the company, other than director fees. 
• auditor relationship: the director cannot be associated with or an employee of the company’s independent external auditor.

Typically, these restrictions apply over the previous three years.

However, Harvard Law School Forum on Corporate Governance in a paper: ‘What exactly Is an Independent Director?’ (1) suggests that ‘independence is not as simple as it sounds. As a director, you may be considered independent for one purpose but not another.’

 

The UK principles-based view of director independence

In the UK, all directors are required to exercise independent judgement, under section 173 of the Companies Act 2006. Beyond that, the UK Corporate Governance Code, published and regulated by the UK Financial Reporting Council, requires the boards of all public companies to report that the independent directors have no ties that might adversely affect the exercise of independent judgement or, if not, to explain to shareholders why the board consider them independent. 

The London Stock Exchange (LSE) listing rules require at least half the board to be independent, plus an independent board chair.  LSE guidelines for a director’s independence include:
 

• the absence of personal links to the company or its affiliates: 
   

The director does not act on behalf of a significant shareholder. The director has not had business dealings with the company for a period  before appointment, either directly or through a related company.  The director does not have family links with other company directors, senior executives, or advisors. The director does not have links with other directors through involvement in other organisations.

 

• the absence of financial relationships with the company: 
   

The director does not receive remuneration from the company, other than the published director’s fee. This includes share options, pension entitlement, or other rewards. 
 

• the absence of employment links with the company:

 The director has not been an employee of the company or one of its affiliates. This requirement may have a time limit on immediate past employment. The director has not served this board for so long that over-familiarity with executive directors may influence independent judgement.

 The London-based Institute of Directors publishes a set of criteria for recognising independence-limiting situations. I listed these in my May blog on the independent director.

The reality of director independence

However, the contribution that an independent director really makes to an organisation is demonstrated not by satisfying independence criteria, but by the attitude, knowledge, and actions in and out of the boardroom.

Some responses to my May blog made the point that independence in a director was not only a negative matter of not having various links with the company or other directors.

But, more positively, independence requires an attitude of mind and a preparedness to act independently. For example, Professor Alfredo Enrione, of the ESE Business School, Universidad de los Andes in Chile, wrote: ‘Your work on the independent director remains required reading for anyone who has sat in those seats. The conversation has matured: independence used to be defined as the absence of conflict; now it has to mean the presence of competence and courage. In Latin America, where roughly 60% of listed firms have controlling shareholders, the ‘independent director’ seat is too often filled by a polite friend with the right surname — independent of nothing meaningful. Three questions I now ask candidates before recommending them for an independent seat:

• what's the last unpopular position you took on a board? 
• what's a topic where you formally disagreed with the chair?
• what was the cost? 
• what would make you resign tomorrow?’

From these comments, I now realise that in my work I have not explored the issue of director independence sufficiently. Nor, as far as I am aware, has the literature of the subject. 

What is required for a director to act independently?

 Unsurprisingly, the question of how individuals interact with others is not new. The ancient Persian Zoroastrian religion (2) produced the idea of independence in thought, word, and deed. This is one of the world’s oldest moral frameworks.(3)

 It strikes me that the triad of thought, word, and deed provides an answer to the question: What does a director need to be, and be seen to be independent? It provides a framework for reviewing the independence of a director.

Independence of thought

Independence clearly demands that directors are not influenced by group-think, rising above a herd mentality that follows decisions without due consideration. Nor should the opinions of a fellow director, board chair, or the CEO, however dominant, dominating, or dogmatic, sway an independent assessment of a situation. Independence calls for a director not to be influenced by the need to be liked by board colleagues, nor a sense of commitment to the chair or other director who recommended them for nomination to the board.

How one thinks, of course, depends on many factors, including family and religious upbringing, education, personality, risk aversion (how optimistic or pessimistic), experience of the world, cultural context, and more. 

Integrity and trustworthiness, essential in a director, are shaped by personal beliefs, which influence thinking.  However, a director’s thoughts can only be assessed by subsequent words and deeds.

Independence of words

Governing bodies spend most of their time in discussion, leading to decisions about strategy, the creation of policies and plans, overseeing management performance and, ultimately, being accountable. 

The way directors express their views inevitably influences their effect on the discussion. Some directors convince by the extent of their experience, knowledge, or analysis.  Some can use humour. Occasionally, a director may influence by demonstrating a depth of feeling on an issue. The way that words are used can demonstrate independence of thought.

Independence of deed (action)

Faced with a meeting agenda, every director needs to decide how to act on each agenda item. They face four options:

• be proactive: take a lead, attempt to achieve a specific outcome
• be ambivalent: consider alternative perspectives, ask questions, to enable a decision to be reached 
• be negative: demonstrate risks, weaknesses of the proposal, act to prevent the proposed outcome
• be passive: avoid involvement in the issue, do not get involved

To be truly independent in action, a director must be prepared to make a stand, state their opinion clearly, defend their position, while also being prepared to move towards consensus with alternative perspectives, until convinced that the outcome reached is right. Showing independence should not mean a confrontational approach in board discussions. Serious debate, on a well-led board, can be tough-minded, yet remain friendly.

 Disagreements with a proposal on the table usually stem from a director’s personal experience, knowledge, or skill, from differing views on uncertain future events, assessment of risk, or ethical concerns (remember board policies effectively provide a moral compass for the entire organisation).

Although rare, situations can arise when a director cannot accept a decision taken by the board. The director then faces five possible actions:

• propose that the item be referred for further study
• propose an independent study on the issue
• threaten to or raise the issue with shareholders, auditors, or regulators 
• threaten to resign from the board
• resign

Being prepared to act in this way is the real mark of a truly independent director. 

The significance of board culture and leadership 
The opportunity for independent directors to act independently, however, is constrained by the culture of the governing body. Every board develops its own culture and dynamics, just as every chair has a personal leadership style.

The culture of a board is a function of many things, including its history (what has happened before), its membership (numbers of and balance between executive/non-executive directors), the personality of each director, and the culture of the country in which it is incorporated (boards in Japan, for example, act quite differently from those in the United States).

Similarly, chairs vary in their leadership style from the boring routine, through the dominant, to the highly experienced and professional.

The routine chair sees the role as no more than drafting or agreeing the agenda, then running the meeting. Starting with apologies and minutes of the last meeting, the routine chair works through the agenda, trying to reach an acceptable conclusion for each item, until reaching ‘any other business.’ 

The dominant chair, on the other hand, decides what should be on the agenda and what the outcome should be. Such chairs tend to do a lot of lobbying before the meeting and decisions are ‘taken in the corner,’ before the meeting. There is little discussion during the meeting, alternative views are seldom heard, because matters have already been decided. Should a dissenting voice be raised, the dominant chair will attempt to silence it. 

In one such governing body, it was said that ‘the chair writes the minutes as he writes the agenda’. Boards led by dominant chairs do not encourage independence of thought. 

 

The professional chair sees the role as leading diverse, and possibly divergent views towards a consensus and a decision on which all can agree. The professional chair ensures that every member is properly briefed and informed about each item on the agenda, so that everyone can take part in a well-informed discussion. The professional chair ensures that all points of view are heard, calling on directors who might be reticent or unsure, to voice their opinion, while controlling any who try to dominate the discussion. It is a subtle leadership role. The culture in such governing bodies allows independent directors to truly exercise their independence. Whereas with a routine chair, independent directors may find it difficult to play an independent role; while with a dominant chair, an independent line has to be taken outside the meeting.

Conclusion
 An essential first step in establishing the independence of an independent director is ensuring that the director has no links with the corporate entity or fellow directors that could compromise, or be seen to compromise, the exercise of completely independent judgement and behaviour. That is true in both rule-based jurisdictions, like the US, and in principle-based jurisdictions, like the UK and other countries that have adopted the Cadbury-style voluntary ‘comply or explain' approach. But that is only the first small step in establishing independence.

 Of far greater significance are a director’s thoughts, words, and deeds. The role of independent director can be challenging, frustrating, and at times lonely. It can also be satisfying, rewarding, and make a vital contribution to the organisation, its stakeholders, and society.

Bob Tricker July 2026

(1) - https://corpgov.law.harvard.edu

(2) - According to Google: The Zoroastrian religion began in ancient Persia (now Iran) and Central Asia, making it one of the world's oldest faiths. It was founded by an ancient priest and prophet named Zarathustra, whom the ancient Greeks called Zoroaster. Scholars believe he lived somewhere between 1500 BCE and 1000 BCE, during the European Bronze Age.

(3) -  In the ancient Avestan language, the triad is apparently known as Humata, Hukhta, Hvarshta.