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hen Steve Au FCPA decided to become an independent non-executive director (INED) shortly after retiring, he saw it as an ideal opportunity to put his experience in accounting and finance, as well as his CPA knowledge, to good use. “If you’re in a later stage of your career, and you have diverse experience, the role is a great way to help companies,” says Au, an INED for Vincent Medical Holdings Ltd. and Expert Systems Holdings Ltd. Though the INED role, he adds, isn’t solely for professionals who are retired or considering retiring, it is a meaningful way to keep busy and add value to companies. “As an INED for a manufacturer of medical equipment and also for an IT systems company, I’m able to learn new things on the job. The benefits are mutual.”

Considered a natural progression for many accountants as they become more senior, the INED role is fully independent from a company, but is invited by the board to provide impartial, objective, and constructive advice regarding their strategy and corporate governance. INEDs also take into account the interests of the board and the company’s stakeholders and shareholders.

In Hong Kong, listed companies listed on the Main Board of the Hong Kong Stock Exchange are required to have at least three INEDs on the board of directors, according to the Chapter 3 of the Hong Kong Exchanges and Clearing’s (HKEX) Listing Rules. The rules also state that INEDs must make up a third of the board of directors and that at least one of the INEDs must have appropriate professional qualifications in accounting or related financial management expertise. This is one reason why becoming an INED is a viable career goal for many CPAs, notes Randy Hung FCPA. “CPAs have many advantages as INED candidates. First of all, they could well become the audit committee chairman or member, as their knowledge will help the board with financial matters,” says Hung, who has previously served as an INED for various companies such as IPE Group, Zhongyu Gas Holdings Ltd., Zhongtian International Ltd. and ZZ Node Holdings Company Ltd. “CPAs who have worked in audit should have the right exposure to different industries, which is a huge plus for the INED role.”

Hung notes that there has been an increase in CPAs looking to become INEDs in recent years, with reasons such as career development, added flexibility and better credentials pushing accountants to vie for the role. “Being an INED allows a CPA to tap into an industry in terms of knowledge, experience and connections, and open up a new area of practice or career opportunities. Associating with listed companies is considered as a ‘professional credential’ too,” he says, adding that INEDs often help listed companies with transactional matters. “INEDs could become a referrer or advisor to recommend the appointment of professional firms to the listed companies in the hope that these appointed firms will reciprocally refer business or career opportunities to the INEDs.”

There is also increased demand for INEDs in general. On 1 January, the HKEX’s revised Corporate Governance Code and Listing Rules came into effect, raising the corporate governance bar for both listed companies and INEDs. The amended rules require issuers to appoint a new INED if their current INEDs have served on the board for more than nine years, and additional disclosures have to be made on why long-serving INEDs are still independent and should be re-elected. To enforce board diversity, the rules also require issuers to appoint a director of a different gender no later than 31 December 2024, with additional disclosures to be made on gender diversity in the workforce. To help issuers comply, the HKEX published Corporate Governance Guide for Boards and Directors in December 2021.

A role overseeing controls

The role of an INED is unique. It calls for individuals who have the right industry knowledge and connections to provide direction to the companies they serve, and build strong relationships with the company management and employees – all while remaining independent. This makes the role ideal for professionals who are in a later stage in their career, as they are more likely to have established an extensive network of connections in different industries that they can tap into to advise the board. “It’s an ideal role, because by the time you’re an INED, you have more career experience. It is a chance to reach another stage in your career,” says Vanessa Chan FCPA, who is an INED for Innovax Holdings Ltd. and Tycoon Group Holdings Ltd. “You also have a chance to broaden your horizons, meet people from different backgrounds and businesses, and provide advice on the strategy and policies of a company. It’s a chance to look at a company from a bird’s eye view.”

It is worth noting that the roles and responsibilities of an INED differ from those of a non-executive director (NED), who, in most cases, has previously worked with the company, and taken on a non-executive role to continue providing advice. “Most NEDs are already known to the company; they could be former executive directors or senior management who have now retired but are retained by the remaining management to give advice to the company from time to time, on a non-executive basis,” explains Paul Cheng FCPA, who is an INED at Bank of Shanghai (Hong Kong) Ltd.

INEDs are not involved in the day-to-day operations of a company, highlights Au. “It’s not our role to ‘police’ companies; we have to ask the right questions and offer management advice from the perspective of an outsider to help their strategy, internal controls, business development and what risks to manage.”

INEDs who are CPAs are, in most cases, assigned to chair a listed company’s audit committee, and also participate in other board committees including the nomination committee, remuneration committee and risk management committee. “The audit committee is responsible for overseeing the financials, risk management and internal control of the company,” notes Chan, who is a committee chairman for the two companies she serves as an INED. “We also hold regular meetings with both external and internal auditors to discuss the performance of a company and assess whether internal controls have been put in place.”

“Because of the increasing complexity of the requirements under the Listing Rules, INEDs are obligated to encourage the chairman and senior management of a company to comply.”

An outside perspective

Working with increased regulation

Amendments to the HKEX’s Corporate Governance Code and Listing Rules have made the role more complex, Chan points out. “Because of the increasing complexity of the requirements under the Listing Rules, INEDs are obligated to encourage the chairman and senior management of a company to comply – and to ensure that the company complies with the regulations genuinely,” she says.

In another example of increased regulatory requirements impacting the board, including INEDs, Hung highlights Part XIVA of the Securities and Futures Commission’s (SFC) Securities and Futures Ordinance, which came into effect on 1 January 2013, making it mandatory for listed corporations to disclose price sensitive, or “inside” information. “It’s a very powerful provision. If the company has inside information that they don’t announce as soon as it is practical, then the SFC has the power to penalize the company in the form of fines or disqualify board members, including INEDs. I’ve seen this happen before,” says Hung.

Since INEDs bear the same level of responsibility as other board members, it is paramount for INEDs to ensure they have an accurate picture of the company and address any issues at hand, before they escalate. “There is now more intense regulatory scrutiny. A decade ago, the SFC usually acted behind the scenes, but now they are more of a frontline regulator. They would not hesitate to investigate or prosecute those suspected of wrongdoing. This, unfortunately, has landed some INEDs in trouble,” he says. “So now, INEDs may be involved in court cases if company directors are charged with wrongdoing. This has made the role riskier and more complex.” To help the company stay out of trouble, Hung advises INEDs to take all the necessary steps to understand the company inside and out. “You have to be very proactive in wanting to understand the company and think of what you can do to protect it,” Hung says. “This experience taught me how to be a better INED and helps me to train people as well.”

INEDs have to be especially wary of companies that have just gone public, adds Chan. “There have been a few cases of irregularities or malpractice seen in companies, especially in ones that have just been listed.” she says. “So it’s been important for INEDs to continuously perform in-depth reviews of the company’s performance and be vigilant.”

Ensuring better corporate governance

The independent nature of INEDs and the fact that they typically serve on various board committees puts them in an advantageous position to help with a company’s corporate governance. “As INEDs, we don’t have a stake in the company. With this independence, we are able to bring a fresh or different perspective to ensure companies follow best practices in terms of corporate governance,” says Au.

As Chan notes, corporate governance has risen in importance in recent years, as a result of investors and analysts seeking a clearer picture of a company’s overall performance and whether its current practices will lead to sustainable growth and returns. “As INEDs, we need to question the long-term integrity of the board and chairman, and whether the company has the appropriate policies or guidelines in place to run the business. We also look at whether it has any contingency or succession plans, or whether there is frequent communication with external and internal stakeholders, and communication between board members and senior management.”

INEDs should utilize their position on company board committees to push for better corporate governance, Cheng notes. Of particular importance, he adds, is ensuring transparency around how directors are nominated, and how their remuneration and bonuses are determined, which is a function of the nomination committee and the remuneration committee, respectively. “There needs to be someone independent of company manangement and controlling shareholders to ensure any nomination for board appointment is in the best interests of the company and shareholders, and that the remuneration awarded to the directors is fair and reasonable,” explains Cheng.

“For example when considering awarding directors year-end bonuses based on their performance, there needs to be someone independent to determine whether the basis for such awards has supporting merits and the amounts to be awarded are reasonable, and are in line with the prevailing market practices. The persons expected by shareholders or stakeholders to do this job with the least conflict of interests  are the INEDs, because of their independence from management and controlling shareholders. These are key requirements among those defining ‘independence’ as stipulated in HKEX’s Listing Rules.”

However, with no written rules in place for both management and INEDs to discuss corporate governance, it is up to INEDs to take the initiative in discussing corporate governance with the board and shareholders, Hung notes. “Corporate governance, in my opinion, is a bit like having effective internal controls – but among board members. The question is how one can control or contain the power of a majority shareholder and the chief executive officer or chief financial officer. There needs to be a good set of rules established among the board – but these rules generally do not exist,” he explains, stressing that improving corporate governance within an organization should be an INED’s number one priority. “INEDs should have a timetable or schedule in terms of what they aim to achieve and then be able to convince the board to go with the plan.”

“As an INED, you’re specifically responsible for upholding corporate governance, which includes compliance – and as CPAs, we have this compliance culture in our blood.”

An outside perspective

A vital head start

The complex role of an INED calls for individuals with adept people skills, and those who can strike a balance between being articulate, honest and considerate. “Many executive directors simply aren’t used to having outsiders during board meetings, and so some of them may feel uncomfortable when we ask critical questions,” notes Au. “So while it’s important that we probe the directors on the intricacies of the company’s operations, we can’t be overly critical or harsh.” Chan agrees, noting that communication, problem-solving and analytical skills are essential to be an effective INED. “You can’t just question everything; you have to be able to look at issues and ask yourself whether they are beneficial to the shareholders or company,” she says.

While the Listing Rules call for a minimum of four board meetings a year, INEDs are advised to be proactive in scheduling frequent formal and informal meetings with the board to build a strong relationship with all members of management. This, Au highlights, will lay a solid foundation for a healthy, long-term working relationship between INEDs and the board, facilitate an honest exchange of feedback and, most importantly, establish trust. “We have to emphasize to executives that as INEDs, we are acting in the interests of the company and its stakeholders,” he says. “Executives may get into the nitty-gritty details of certain aspects about the company during board meetings and oftentimes, as INEDs, we are unfamiliar about what they’re talking about. At the same time, it is our role to monitor their strategy and how they deliver it. This requires asking questions that have been carefully thought out.”

Hung says that INEDs shouldn’t shy away from getting to know board members outside of the office, noting that INEDs should make the most of one-on-one time to build trust and rapport, and to communicate on any sensitive matters. “INEDs should aim to take time to speak privately with individual members of management, especially those who have influence in the company. Instead of challenging them, they should first aim to fully understand any issues at hand first. And when it comes to solving issues, INEDs have to be tactful and polite,” he stresses. “My advice is to never bring up sensitive issues during board meetings, unless they have been discussed individually with the members.”

Hung adds that current and prospective INEDs should always remind themselves about what they want to achieve in the role. “I wouldn’t say age or experience matter the most. What matters is why you chose to become an INED in the first place,” he says. “Some might only become an INED just for the name or the money, but it isn’t a good enough reason. They have to ask themselves what they want to accomplish, what changes they hope to see, how they will improve corporate governance and why they are helping this particular company.”

Cheng points out that CPAs have a head start in terms of the prerequisite skills needed to be an INED. “As an INED, you’re specifically responsible for upholding corporate governance, which includes compliance – and as CPAs, we have this compliance culture in our blood,” he says, noting that helping with corporate governance is similar to doing an audit, as it involves a thorough understanding of a business. “CPAs always strive to understand a business before we set our audit programme, which in most cases, involves employing a risk-based approach.”

Actual experience working with a board, Au highlights, can benefit CPAs who wish to become INEDs. “Back when I was a CFO, I learned how to handle board situations. I also saw how INEDs used to critique and question us. This helped tremendously,” he says. “So now that I’m an INED, I know how to ask the right questions and in a way that will help and won’t upset management.” ​

A trusted advisor

The INED role, Au adds, is well-suited for those who are retired but still looking to contribute to a company’s success. “I think all CPAs should give thought to becoming an INED. It’s an interesting role and very different from a regular full-time job,” he says. “The job can offer you a lot of perspectives and allow you to build connections with people in different industries.”

Chan says the most rewarding aspect of the INED role is being able to sit at the highest level of a company and drive company growth. “It’s fulfilling to be involved in setting the strategy along with the board, attend meetings to discuss the business plan, mission, growth strategy and then make recommendations to the board,” she says. “We have to look at all aspects of the company and consider many factors beyond the finances.”

Being seen as a trusted member of the board, Hung concludes, makes the INED role worth pursuing. “The real satisfaction comes from knowing that you are working well together with the board, and as a team,” he says. “You can feel it, especially when the executive director comes to speak to you about other things beyond what’s expected of you as an INED. You then realize that you have become a key advisor to the board.”


According to the Chapter 3 of the Hong Kong Exchanges and Clearing’s Listing Rules, INEDs must make up a third of the board of directors and that at least one of the INEDs must have appropriate professional qualifications in accounting or related financial management expertise.

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