What is ‘independent judgment’—and how should board directors use it?
Directors are obliged to exercise independent judgment in their decision-making. But there is little guidance on what this means in practice.
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Do you exercise independent judgment as a company director? Of course you do. Saying “No” is almost like admitting you are lazy or stupid. But not so fast. Would you know what “independent” and “judgment” mean in practice?
That’s not easy. There is no official guidance, or even definition. If pushed on what it is, the reaction of many is often “I’m not sure, but I know it when I see it”.
As someone who’s been on more than 20 boards, I know that kind of phrase is not very helpful when the chips are down. The stakes are also higher than hoping for the best because, as a director, independent judgment is not an option
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