Appointing independent directors to a family-group board
An independent director needs a clear mandate and access to the information behind the board’s decisions. What to settle before making the appointment.
Agree the board’s remit
Before approaching candidates, set out what the board can approve, where it advises and what remains with management. The governing documents and applicable duties frame that remit. Experience useful for a new investment may differ from what a reorganization requires. Candidates need to understand that agenda before accepting the role.
Dividends, employment and succession may be discussed by both the family and the board. The chair should explain which decisions belong to owners and how a disagreement reaches the appropriate body. Reserved matters and the board’s mandate must be read alongside each director’s legal duties.
The incoming director’s papers
- Standing information
- A view of the businesses and their economics, operating history, significant commitments and material risks. Use consistent definitions for recurring measures and identify changes since the previous meeting.
- Each approval item
- State the decision requested, the commitment involved, alternatives considered and management’s recommendation. Identify information still outstanding.
Agree how directors receive sensitive commercial information. Access controls must still allow them to examine matters within the board’s responsibility.
Questions for candidate discussions
- Which gap would the appointment fill: capital allocation, operating experience, audit oversight or knowledge of a proposed market?
- Can the candidate examine unfamiliar evidence and question the assumptions behind a recommendation?
- Do conflicts of interest or other commitments limit preparation, attendance or participation?
- How would the proposed members work together, and which perspective would still be missing?
What the chair checks after appointment
After the first meetings, the chair checks whether papers arrived with enough time for preparation and whether directors had the information needed to decide. Missing information and unclear responsibilities go back to management. Minutes should record dissent accurately, along with decisions and any conditions requiring follow-up.
Appointment terms and applicable legal obligations are reviewed with qualified advisers before the appointment is completed.
General management information. Decisions about your organization should account for its circumstances and any specialist advice required.
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