When Boards Should Commission an Independent Review

By Adrian Lawrence FCA, founder of NED Capital · Part of the Board Governance Hub

Most board decisions are made by the board itself. But there are moments when a board needs to step outside its own perspective and bring in an independent party — to review its effectiveness, investigate a problem, or provide an objective assessment that carries a credibility the board’s own conclusions could not. Knowing when those moments have arrived, and acting on them promptly, is itself a mark of a well-governed board. A board that never reaches for independent scrutiny is often one that most needs it.

This guide sets out the main situations in which a board should commission an independent review, what independence actually buys, and how the non-executive directors should approach commissioning one.

1. The Routine Case: The Board Effectiveness Review

The most common and least dramatic reason to commission an independent review is simply good governance. The UK Corporate Governance Code recommends that boards of premium-listed companies undertake a formal, rigorous annual evaluation of their own performance — and that, at least every three years, this evaluation be externally facilitated. This triennial external review is the single clearest answer to “when should a board commission an independent review”, because for many boards the Code effectively sets the schedule.

An externally facilitated board effectiveness review examines how the board works: its composition and balance of skills, the quality of its discussions and challenge, the effectiveness of the chair, the functioning of its committees, the quality of board papers and information flow, and the board’s dynamics as a group. A good external facilitator interviews directors individually, observes the board in session, and reports candidly on what is working and what is not — things directors may be reluctant to say to each other directly but will share with an independent third party. Even for boards outside the Code’s formal scope, periodic external review of this kind is increasingly regarded as best practice, and it is where the discipline of independent review most naturally lives.

2. The Reactive Case: After a Failure or Serious Incident

When something has gone seriously wrong — a governance failure, suspected fraud, a significant control breakdown, misconduct, a data breach or a public crisis — an independent review is often essential rather than optional. The reason is credibility. A board investigating a failure that occurred on its own watch cannot easily be seen as objective, however diligent it is; stakeholders, regulators and the public will discount conclusions the board reaches about itself. An independent reviewer, with no stake in the outcome, can investigate what actually happened, apportion cause honestly, and recommend remedies with an authority the board’s own account would lack.

This is the situation where independence earns its keep most visibly. An external reviewer can interview people who might not speak freely to the board, follow evidence wherever it leads including towards board members or senior executives, and deliver findings that are uncomfortable but trusted precisely because they did not come from inside. Commissioning such a review promptly, and being seen to act on it, is often the difference between a board that recovers stakeholder confidence after a failure and one that does not.

3. The Dispute Case: When the Board Cannot Resolve It Itself

Sometimes the issue is internal to the board. A serious boardroom dispute, a breakdown in the relationship between the chair and chief executive, a persistent conflict of interest, or a disagreement over strategy or conduct that the board cannot resolve through its own processes can all warrant independent involvement. Where the board is itself party to the problem, it cannot be the impartial arbiter of it, and an independent review or facilitation can break the deadlock and provide an objective basis for resolution.

This overlaps with the effectiveness review but is triggered by a specific, live problem rather than a routine schedule. The senior independent director often has a role here — the Code envisages the SID as a point of contact when the normal channels of chair and chief executive have broken down — and commissioning independent input is one of the tools available when a board’s own mechanisms have reached their limit.

4. The Regulatory Case

For regulated firms, an independent review may be expected or required by the regulator. In financial services, the FCA can require a firm to commission a “skilled person” review under section 166 of the Financial Services and Markets Act — an independent assessment of some aspect of the firm’s operations, controls or governance, carried out by a party the regulator approves. Beyond formal powers, regulators across sectors increasingly expect boards to demonstrate independent scrutiny of high-risk areas. Where a regulator has raised concerns, commissioning an independent review pre-emptively — before being told to — can both address the substance and signal that the board takes the issue seriously.

5. The Transactional Case

Major transactions are another trigger. Ahead of an acquisition, a disposal, a significant investment or a fundraising, a board may commission independent due diligence or a fairness assessment to test the numbers, the risks and the assumptions behind a deal — particularly where management is the proponent and the board needs an objective view of a transaction the executives are advocating. Independent input here protects the board’s decision and its directors, giving them an evidenced basis for a judgement that may later be scrutinised. Our work on M&A board support frequently sits alongside exactly this kind of independent review.

Getting the Review Right

Whatever the trigger, an independent review is only as good as its commissioning. Three things matter most. The first is a clear, well-defined scope: the board must be precise about what the review is to examine and what question it is to answer, because a vague brief produces a vague and unusable report. The second is genuine independence: the reviewer must have no conflicting interest or prior relationship that could compromise objectivity — the whole value of the exercise collapses if the reviewer is not, and is not seen to be, independent. The third is a genuine commitment to act: a board that commissions a review and then ignores its uncomfortable findings has wasted the exercise and damaged its own credibility. The point of independent scrutiny is to act on what it finds.

Underlying all of this is the board’s own composition. A board with genuinely independent non-executive directors is better placed both to recognise when an independent review is needed and to respond well to its findings — because independence of mind at the board table is what prompts the question in the first place. At NED Capital we appoint non-executive directors with exactly that independence and judgement, and every search is led personally by Adrian Lawrence FCA, a Fellow of the ICAEW and former listed-company finance director. To strengthen your board, our NED recruitment service is the place to start, and our guide to corporate governance sets out the wider framework these reviews sit within.

NED Capital | Sister practice of FD Capital | ICAEW practising certificate held by Adrian Lawrence FCA.