Independent directors are members of the board without a material relationship with the company and its management.
As a result of this independence, the directors are in a position to be an independent sounding board for management on various issues including compliance, risk, and governance among others.
Independent directors should have that level of competency that will enable them to handle board papers without compromising their independence.
The list of competencies they should possess is long but in my view, the following are key ones;
Both inside and outside the boardroom, independent directors tend to face many challenges that call for a positive attitude when faced with the challenges. The key challenges include a widening expectations gap, lack of adequate information, lack of trust, criticism from regulators and other stakeholders, and conflict of opinion among others. A positive attitude towards the above challenges will certainly help directors in making better and more informed decisions.
Ability to listen, understand, and ask questions
The member should have the ability to listen and understand the presentation of management and the views of other board members. Where the presentations and views of management are not clear enough, independent directors should ask probing and direct questions. The questions should be asked even if they annoy some members of the management team. The questions and opinions of the independent directors will help management improve the board papers and lead to a better understanding of the challenges facing the company. Informative board papers will result in better and more informed board decisions.
Preparation for meetings
Independent directors should spend adequate time reading and understanding the board papers. The member should feel free to request more information from management in case the board papers are not clear enough. The preparation will enable independent directors to effectively participate in board meetings. Attending board meetings should not be a matter of just showing up for a meeting without adequate preparations.
The business-like approach adopted by the board will encourage efficiency and promptness in decision-making. Management will also obtain quality feedback from the board. The independent directors should therefore cultivate and encourage a business-like approach that will lead to better and more informed decisions. This will result in the overall efficiency and effectiveness of the operations of the company.
Effective Team player
The independent directors as part of the governance team should understand and appreciate the mission of the company. The focus of the board and management should be geared towards the achievement of the mission of the company as guided by the strategic plan. The team approach will create a conducive environment that will enable both the board and management to effectively contribute towards the achievement of the mission of the company.
Strategic thinking is a deliberate focus of both the board and management on critical issues that will lead to the long-term success of the company. The critical issues that should be appreciated by the board include economic conditions, business plans, human resources, competition, and technology among other issues. The strategic thinking approach will make it easy to focus on the long-term success of the company.
The independent directors should have adequate financial knowledge and capacity to discuss board papers, especially in areas of strategic planning, budgeting, credit, savings, borrowing, financial performance, investments, taxation, and others. Armed with financial knowledge, directors will be in a position to use available financial information during the process of making important and sound financial decisions.
Corporate governance experience
Corporate governance relates to the system by which companies are directed and controlled. The independent directors have to appreciate the sharing of power and accountability and the parties responsible for decision-making. Independent directors should therefore have adequate working experience in the way companies are governed to achieve their intended purpose.
The possession of the above key competencies by the independent directors will result in better and more informed decision-making at both board and management levels.