The benefits of independent directors

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The benefits of independent directors

Updated: December 4, 2019
2 min read

Before delving deep into the benefits of having an independent director on any given board, let’s define the term.

For a director to be independent, they can’t be a company employee or shareholder. Nor can they be a family member of another director.

Mostly, they’re someone that’s brought in from the outside, who possesses a neutral perspective. The independent director is meant to uphold the best interests of the shareholders, employees, customers, and the entire organization.

This director’s independence means they aren’t impacted by internal or external forces, and the board leverages that centered approach to reach informed decisions.

Independent directors bring a fresh perspective

When people are too immersed in a company’s culture, it’s only human to develop biases and lean towards a specific way of thinking.

That isn’t to say the knowledge of the ins-and-outs of an organization’s infrastructure and personnel is a bad thing. In fact, it’s quite the opposite. Generally, the more boards of directors know about their business, the better.

However, like everything else in the world, there’s a need for balance. Without someone from the outside looking in, offering their own take, it’s too easy to fall into the same patterns and traps that keep a company stagnant.

The independent director brings clarity and objectivity to the table that complements the rest of the board’s understanding of what came before.

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A fresh set of highly developed skills

Any independent entity being brought onto a board of directors is going to be someone with a sterling reputation and a history of success.

They’ll possess vast knowledge when it comes to finances, marketing, governance, and strategy. On top of that, these talented individuals have their own resources and business networks that can be of benefit to the organization.

Combining this skill set with the objectivity mentioned above makes independent directors a welcome addition to any board.

A level head in times of conflict

There’s going to be differences in every board. In family-run boards, for instance, it’s virtually a guarantee that there’ll be conflicts of interest.

In many cases, when these situations arise, and there appears to be a conflict of interest, independent directors can resolve the problem. They prevent board members from making decisions in the best interest of themselves and ensure that all motions and transactions occur with the organization in mind.

An objective evaluator for succession planning

Another scenario where internal, personal biases can play a negative role is when deciding which employees move up the corporate ladder.

When boards become too ingrained in the culture of the company, it can give them tunnel vision. There’s a tendency to earmark future leaders and never revisit or reassess the situation. Whereas an independent director is far more likely to find those diamonds in the rough, overlooked by the board.

The unique view brought forth by an independent director means they could see something special in an entry-level worker, for example. That hypothetical person could end up being an organization boon that – without an independent director – wouldn’t have been discovered.

Were you on the fence about finding an independent director? Hopefully, this article has clearly illustrated they could provide a massive benefit to your board.

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