Every listed board counts its independent directors. Very few measure their independence.
The CMA Corporate Governance Regulations set a clear floor for companies listed on the Saudi Exchange: independent directors must make up at least two members or one-third of the board, whichever is greater. On paper, most boards comply.
But the number of independent directors was never the point. The real question is whether any of them has ever changed the outcome of a decision.
What the Regulations Test — and What They Can't
The regulations define independence largely by what a director must not be. Independence is impaired, for example, when a director is:
- A significant shareholder — owning 5% or more of the company or its group, or representing an entity that does
- Family — a relative of a board member or senior executive of the company or its group
- Recently on the payroll — employed within the past two years by the company, its group, or a key counterparty such as the external auditor or a major supplier
- Commercially tied — holding a direct or indirect interest in the company's business and contracts, or competing with it
- Too long in the seat — more than nine years on the board, consecutive or not
The regulations also require the board to assess every year whether each independent director remains independent.
These tests protect the status of independence. They cannot guarantee the behavior. A director can pass every test on paper and still approve every recommendation, defer to the chair, and avoid every uncomfortable question.
Four Signs of Real Independence
Independence shows up in the boardroom, not in the annual report. A genuinely independent director:
- Asks the question everyone is avoiding — in the meeting and on the record, not in the corridor afterwards
- Votes against a recommendation when it deserves it — even as the only dissenting voice, with the reasons recorded in the minutes
- Reads the board pack before the meeting — and asks for the information management did not volunteer
- Owes the seat to no one at the table — appointed through a transparent nomination process, not personal loyalty
The Warning Signs Boards Miss
When independence exists only on paper, the symptoms are consistent:
- Every decision is unanimous, every time, for years
- Independent directors were hand-picked by the controlling shareholder or the CEO
- Minutes record approvals, but never debate
- Conflicts of interest surface after the vote instead of being declared before it
- Independent directors have never met on their own, without management in the room
An independent director who never disagrees is not a safeguard. That seat is just one more signature.
How to Make Independence Real
Independence can be designed, not just declared:
- A transparent nomination process — a nomination committee working from a skills matrix and documented criteria, not from personal networks
- A substantive annual review — treat the yearly independence assessment as a real evaluation, not a declaration form to sign
- Real access — direct access to information, to the internal and external auditors, and to independent advice when needed
- Evaluation of behavior, not just attendance — board evaluations should look at preparation, challenge, and dissent, not only at how many meetings were attended
For family businesses and private companies preparing for investment or an IPO, appointing genuinely independent directors early is one of the strongest signals of governance maturity a board can send to investors and lenders.
Measuring It
Most boards cannot answer a simple question with evidence: does our governance work the way our policies say it does? The RASEKH™ Governance Index was built to answer exactly that — assessing 15 governance domains, including how decisions are made, delegated, and overseen, with every score backed by evidence and a verifiable certificate at the end.
The Bottom Line
Regulations can require independent directors. Only the board can make them independent. At your next meeting, ask one question: when did an independent director last vote against a management recommendation? If nobody remembers, the board already has its answer.
