Theory of the “Independent Director” with a View to Corporate Governance in Iran

Abstract

The present article, focusing on the concept of the independent director within the framework of Iran’s corporate governance system, centers its discussion and analysis on this thematic domain. Moreover, this study examines the hypothesis that the genuine presence of such directors can enhance transparency, reduce conflicts of interest, and protect the rights of minority shareholders; however, evidence indicates that within Iran’s institutional context, director independence has largely remained nominal. Therefore, the central research question concerns the extent to which the actual level of independence of independent directors in Iran’s corporate governance structure can improve the effectiveness of board oversight, reduce conflicts of interest, and enhance the quality of firms’ strategic decision-making. The purpose of the study is to analyze the theoretical and comparative foundations of the independent director based on OECD principles and global experiences, to examine domestic regulations—including the Corporate Governance Code of Conduct—and to identify existing challenges and reform-oriented solutions. The methodology employed is a combination of theoretical analysis and applied examination of regulations and practical mechanisms in listed companies. The findings reveal that the main challenges in Iran include the absence of a precise definition of independence, the appointment of directors under the influence of major shareholders, weak enforcement mechanisms, limited specialized human capital, and cultural resistance to independent oversight. The proposed solutions emphasize redefining independence, strengthening selection processes with the participation of minority shareholders, mandating the presence of independent directors on key committees, developing training and awareness programs, and benchmarking international models. The final conclusion is that realizing the genuine role of independent directors in Iran is an institutional necessity and a fundamental condition for enhancing the efficiency of the capital market, increasing transparency, and fostering public trust.