The independence of senior independent directors (SIDs) is the cornerstone of any good external board governance system.

Whether the job is fulfilled by a US ‘lead independent director’ (LID), or a UK-based SID, the roles both play a crucial function, despite having contrasting purposes.

A LID is effectively a chair-in-waiting and, with a substantial number of US companies combining chair, CEO and president into one all-encompassing function, LIDs really come into their own if and when a CEO is fired and they have to step in to become a senior member of the board.

At the other end of the spectrum, the chair and CEO require a distinct separation of roles for listing on the London Stock Exchange.

The role of the chair

Irrespective of people skills and a balanced approach, organisational success still depends largely on the chair’s effective utilisation of the senior independent director.

Engaging in a discussion with the chair about the reasons for the SID nomination is essential. Some chairs seek to appoint a SID who won’t disrupt the status quo or challenge their authority.

In many cases, the jury is still out on how constructive the chair-SID relationship can really be. It is not infrequent for the chair to consider the SID a threat.

In Australia, the SID equivalent was the deputy chair, a role that was quickly discarded owing to the discomfort of the chair.

So, the question remains: is the SID entirely necessary for boards? There can be good reason for doubt. In the US, LIDs were created due to a functional necessity—they act as the chair-in-waiting.

No such clarity exists for the UK senior independent director. Their nature and contribution is, in reality, determined by each individual board and chair. It is small wonder that many SIDs ask themselves, ‘What is my job really about?’

The value a senior independent director brings

Independence is the cornerstone of the role and contribution that an external director brings in the Anglo-US board governance system, whether they are acting as a SID or LID.

As with the US, British boards have independent, external directors who occupy the majority of board positions.

In this context, the UK chair both challenges and supports the CEO, at times shaped by the SID’s interventionist nature.

All of which leads to the ultimate question in this never-ending boardroom-style Game of Thrones: what is the actual value of a SID?

The 2003 Higgs Independent Review of Non-Executive Directors’ recommendations incorporated the UK Corporate Governance Code and Financial Reporting Council views of the SID into the governance framework of corporate boards.

This is less prevalent in public sector and charity trustee boards. The design is centred on SIDs serving as a critical balance to the chair, ensuring healthy governance and structure, paving the way for supportive board dynamics.

In instances where decisions are made by the chair and CEO without full board engagement, eyes turn to the SID to intervene. The SID discerns when board members are unsupportive of a particular strategy and determines appropriate alternative courses of action.

Moreover, SIDs should play a crucial role in identifying and mitigating the adverse effects of a dominant personality or group of directors on the board, although this is also a critical part of the chair role.

Countering challenge

It is generally in challenging situations that the SID acts as a counterpoint to the chair. However, for this dynamic to be effective, there must be a high level of trust and respect between the chair and the SID, along with a mutual recognition of the SID’s role and objectives.

Ideally, the SID plays a pivotal role in supporting the chair, occasionally serving as a mentor and wise counsellor who can effectively convey challenging messages. The SID acts as a sounding board for the chair and an intermediary for other directors.

In addition, SIDs can become an alternative communication channel for board members, proving especially beneficial when concerns arise that they believe haven’t received adequate attention from the chair or CEO.

Identifying and addressing shareholder or non-executive director concerns that may be overlooked is a further key responsibility for the SID. This requires the SID to discern signs of emerging conflict or unease among fellow board members and articulate these concerns at the appropriate time to prevent issues from escalating.

An effective SID needs to possess strong listening skills and high-level skills linked to political engagement and intelligence, combining emotional sensitivity with strategic focus.

The SID should also serve as a mediator who can facilitate the resolution of disputes, particularly those involving the chair.

In the event of a conflict between the chair and CEO, it is up to the SID to frame the nature of the problem and aid in resolving the dispute.

During times of crisis, especially when the chair is displaying diminished effectiveness, the SID must assume the role of a spokesperson for the rest of the board, addressing the concerns of shareholders, executives and the public.

Additionally, in IPOs where the chair lacks prior experience, the SID will play a crucial role in providing guidance and expertise.

Reviewing board performance

A critical element of effective board function is the annual review of performance and contribution.

Questionnaires and confidential, informal discussion can surface concerns that need attention and lead to recommendations for key actions.

In a minority of cases, the chair undertakes the review, but this should be conducted sparingly.

The critical part of the review is the process of considering the contribution and impact of the chair themselves.

Occasionally, the company secretary undertakes the review, mainly because of their familiarity with the board, but equally because they stand apart from the dynamics within it.

However, the question of independence still arises owing to the closeness between company secretary and the chair.

As a result, other than external agents, the most likely candidate for conducting a board review is the SID. Their experience, position and sensitivity provide just the right balance of independence and trust, especially if relations between the chair and CEO are strained.

Chair succession

The SID typically spearheads the identification and appointment process for a new chair, an activity that is still not often given sufficient attention.

The SID’s role extends to actively listening to both the board and shareholders, evaluating whether the chair continues to act in the company’s best interests, and initiating a chair transition process as required.

Dealing with a chair who is hesitant to step down, or who is becoming unfit for the role, can pose a delicate task. This means a clear delineation of the SID’s role and duties required in the removal, succession and appointment of the chair. It is up to the SID to ensure that proper succession planning is in place.

In certain situations, the SID may need to assume the role of deputy or interim chair, especially in the case of illness.

There are further instances where the SID emerges as the most suitable candidate for chair at times of succession. If the latter case applies, then the SID should transparently communicate this at the outset of the process and recuse themselves from the search.

It is imperative that the SID’s role is clearly defined in written terms to encompass all of the above considerations. This ensures a structured and well-understood framework that details the management of chair transition and succession planning.

Sensitivity to stakeholder needs

Understanding the expectations of critical stakeholders is especially important for the SID, whose role demands a deep knowledge and understanding of the company and board dynamics.

Being attuned to the concerns of fellow board members and key stakeholders, including investor representatives, is a primary SID responsibility. This awareness ensures that, if and when situations arise, stakeholders can feel comfortable in approaching the SID with any questions or concerns.

The SID may find themselves in a unique position, effectively acting as an alternative point of contact for ‘investor activists’ who have encountered challenges in their discussions with the chair, CEO or CFO.

Some may view the SID as a means to influence changes on the board or its strategy, potentially co-opting the SID to represent their case.

To minimise risk and better ensure positive board and organisational outcomes, understanding stakeholder expectations and identifying early warning signs enables the SID to contemplate scenarios that require their intervention.

This preparation allows the SID to perform as a composed and rational voice when emotions become heightened. Knowing stakeholders and their expectations enables the SID to navigate potential challenges and be a steady and reasoned influencer of the board.

Aspiring and existing SIDs must possess:

• Independence: It is imperative for the SID to be independently minded throughout their tenure. A capacity to resist the pressure to align with particular interests is vital.

• Complementary skills and experience: The SID should bring a complementary set of skills and experiences to the table, distinct from those of the chair. This positions the SID as a valuable sounding board. Their ability to exercise independent judgment, support the chair when disagreement exists, and discern when to assume specific responsibilities is crucial.

• Strong interpersonal skills: Given the role’s demands, the SID must possess strong people skills. This is particularly vital as SIDs take the lead in evaluating the chair’s performance and serving as an intermediary for other directors.

• Supportive, yet challenging: Effective SIDs should also strike a balance between being supportive of the chair and, when necessary, challenging. This necessitates humility, avoiding the pursuit of personal glory, and focusing on the collective success of the board and the organisation.

Nada Kakabadse is professor of policy, governance and ethics, and Andrew Kakabadse is professor of governance and leadership, both at Henley Business School.