Good Governance Guides

Good Governance Guide: No 1.4

Category: Structure
Subject: Independence of Directors
Source: Chartered Secretaries Canada

Generally speaking at least 50 % of the Board should be comprised of independent and unrelated Directors. Independence should not, however, come at the expense of competence. There is also a need to be highly selective in matching skills to requirements and to ensure that compensation is sufficient to attract capable individuals of good reputation. The “independence” factor affords an opportunity to populate the Board with respected leaders who can ultimately assume responsible roles on Audit, Compensation, Corporate Governance Committees or, indeed, on all Committees of the Board.

An important element in securing strong independent Directors is the selection process, including the criteria adopted by the Nominating Committee which itself should be comprised largely of independent Directors. The challenge faced by the Nominating Committee is to fill vacancies with individuals who can contribute to the Board dynamic, appreciating that critical thinking and objectivity are more important than conformity.