Overview
Good corporate governance depends heavily on the independence of directors. Without it, boards can be swayed by powerful stakeholders rather than guided by what is truly best for the company. Independence also works alongside impartiality, the quality that allows directors to manage a company's affairs without favour.
This is where Independent Directors earn their keep. They bring an objective eye to the board and offer expert, uncompromised opinions rooted solely in the company's best interest. Their role is sensitive, and it is central to the company's long-term sustainability.
Over time, the Independent Non-Executive Director (INED) has gone from being a nice addition to a mandatory requirement. Most governance codes now expect boards to include at least two independent directors. In Nigeria, the Nigerian Code of Corporate Governance 2018 recommends that most Non-Executive Directors (NEDs) be independent. The Nigerian Communications Commission Code and the National Insurance Commission Guidelines make similar demands. Most significantly, the Companies and Allied Matters Act (CAMA) 2020 requires public companies to have at least three independent non-executive directors on their boards.
This article examines the legal framework that defines the INED's role. It considers the factors that can erode an INED's independence, the functions they perform, and why their independence and impartiality must be protected.
