An independent director is a company director who has no relationship with the company or any of its subsidiaries, either directly or indirectly, or as a stockholder, partner or officer of any company or organization that has a relationship with the company.
A company’s board needs to set independence standards to determine a director’s independence.
An independent director and his immediate family should not have been an employee or executive of the company within a period of several years. Additionally, an independent director and his immediate family should not have any business relationship of the company’s auditor, compensation committee or have made or received any payments from the company within a period of several years.
Also, an independent director and his immediate family should not have made any contributions to any non-profit organizations which the company also contributes to.
