SUNANDO ROY – On Banking, Finance and Society

In modern corporate governance, the rise of complex corporate groups has brought renewed focus to the role of the independent director and the challenges posed by the same independent Director presence on multiple boards within the same group.
The question of whether an independent director of a parent company may also serve on the board of its subsidiary reflects this broader dilemma: how to maintain true independence when oversight responsibilities intersect with group-level influence.

A Look at Regulations Across Jurisdictions

Globally, governance regimes in the United States, United Kingdom, Europe, and major Asian markets do not prohibit dual appointments outright.
Instead, they emphasize :
• robust independence criteria,
• transparency, and
• management of conflicts of interest.
Supervisors, particularly in financial sector, evaluate independence not only in terms of formal relationships—such as financial ties, shareholdings, or recent employment—but also through the director’s ability to exercise objective judgment free from undue influence. Dual roles are generally acceptable when the corporate group is integrated, related-party transactions are minimal, and strong governance processes ensure an arm’s-length approach.

Across the Gulf Cooperation Council (GCC), regulatory practices mirror these global standards. In Saudi Arabia, the UAE, Qatar, Kuwait, Oman, and Bahrain, corporate governance regulations do not bar independent directors from holding dual positions in parent and subsidiary boards. Instead, regulators focus on ensuring that independence—both in form and in substance—is preserved. GCC frameworks consistently require that independent directors remain free from material financial relationships and avoid any real or perceived conflicts of interest arising from group-level influence or overlapping board duties. Boards therefore must regularly assess and justify the independence of directors, particularly when parent–subsidiary structures create opportunities for influence or when significant related-party transactions are involved.

Assessing Independence Erosion – A checklist

Preserving independence in dual roles depends as much on conduct as on formal compliance. Independence may be compromised not only by direct conflicts but also by more subtle erosion of objectivity. Hence, regulators should, while approving such appointments, must review concerns for independence loss or erosion.
Key risk indicators
Indicators of independence loss include significant financial or advisory ties with the group, recent employment within the parent or subsidiary, close family relationships with executives or major shareholders, participating in operational decision-making rather than remaining non-executive, excessive cross-directorships within the group, long tenure that fosters overfamiliarity, and compensation structures linked to group performance. Behavioral signals—such as failing to challenge management, relying exclusively on internal information, or consistently aligning with controlling shareholders—can also reveal diminished independence. Recognizing and mitigating these indicators is essential to ensuring that dual directorships strengthen governance rather than weaken it.
In corporate groups, the following evaluation is therefore necessary to be on the right side of regulatory compliance and conflict of interest management. Any deviation from the checklist below should invite a review and inviting regulatory attention on diminished independence of independent directors.