Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo.

Why Independent Non-Executive Directors are an important part of Corporate Governance ?

05 June 2022 – Vanessa Galhardo-Galhetas

Independent Non-executive Directors (INED’s) are members of a Board of Directors that act as independent advisors and are not responsible for the daily operations of the company. They co-develop strategy through constructively challenging views, positive criticism, external experience, and expertise. Moreover, they will oversee the activity of Executive Directors and help to ensure that they meet their objectives.

The importance of the role of INED’s has been recognized over the past years by regulators, imposing companies in certain sectors to have a certain number of INED’s on their Board of Directors.

INED’s are not employees of a company and in their role, they bring an objective and independent view in the boardroom. Their broad perspective brings an added value and protects the interests of the shareholders.

Consequently, INED’s are an important part of Corporate Governance and their role is characterized by the following : 


1. Sufficient time commitment

INED’s are required to commit to a sufficient availability to perform their role. For example, art. 62 §1 Belgian Banking Law limits the number of mandates that an INED can take up, allowing a sufficient availability. European Bank Authority (EBA) Guidelines EBA/GL/2017/12  determine that institutions have to define the role, responsibility and time commitment for roles and that Directors can be asked to engage to respect to the necessary time commitment. 


2. Corporate strategy

INED’s help with formulating and overseeing the corporate strategy by providing constructive criticism and a broader view on the strategy prepared and proposed by the Executive Directors. 


3. Overseeing the activities of Executive Directors

INED’s play an important role in the supervision of the management team and will evaluate whether or not the management has achieved its goals.


4. Managing risks

INED’s contribute to developing frameworks and controls for accessing and regulating risks and ensure that risk management processes are robust. 


5. Absence of conflicts of interest

Given the independent role of the INED, it is crucial to ensure the absence of conflicts of interests. Therefore, certain sectors, such as the financial sector foresee in verifications before the appointment of the INED and during the mission of the INED.

In the financial sector, a “Fit and Proper” analysis will be made prior to the appointment of an INED ensuring that the most suitable candidate is withheld for the open role.

If you have questions related to the role of INED’s and the rules on “fit and proper” in the financial sector, do not hesitate to contact us.