Legal Definitions - affiliated director

An affiliated director is a member of a company'sboard of directors who is not an employee or part of the company's executive management, but who has a significant relationship with the company that could potentially influence their independent judgment. This relationship prevents them from being considered a fully "independent director," even though they are not involved in the company's day-to-day operations. Such affiliations might include substantial business dealings with the company, recent past employment, or close family ties to executives.

Here are some examples illustrating the concept of an affiliated director:

• Example 1: Business Relationship

  A partner at "Legal Eagles LLP," a law firm that has been the primary legal counsel for "Tech Innovations Inc." for the past decade, is appointed to Tech Innovations' board of directors.

  Explanation: While the partner is not an employee of Tech Innovations, their law firm's substantial financial relationship with the company (as a major client) creates an affiliation. This connection could potentially influence their decisions on the board, making them not fully independent, even though they are not involved in Tech Innovations' daily management.

• Example 2: Recent Past Employment

  Ms. Chen, who served as the Chief Financial Officer (CFO) of "Global Manufacturing Co." for 15 years, retired last year. She was subsequently invited to join Global Manufacturing's board of directors.

  Explanation: Ms. Chen is no longer an employee or part of the executive management team. However, her recent long-standing executive role within the company creates a strong affiliation. Her deep historical ties and potential for influence or being influenced by former colleagues mean she is not considered an independent director, despite her non-executive board position.

• Example 3: Family and Consulting Ties

  Mr. Davies, whose consulting firm provides specialized marketing strategy services to "Retail Giant Corp." on an ongoing project basis, is appointed to Retail Giant's board. Mr. Davies also happens to be the brother-in-law of Retail Giant's CEO.

  Explanation: Mr. Davies is not an employee of Retail Giant. However, both his firm's continuous business relationship with the company and his close family tie to a key executive create significant affiliations. These connections could reasonably be seen to impact his objectivity and independence as a board member, distinguishing him from a truly independent director.