There are situations in which the board of a company cannot conduct an adequate internal investigation using its own resources and its regular advisers, regardless of the quality of those advisers and the diligence of the board itself. Recognising those situations early, and responding to them with the right structure, is one of the most important governance judgments a board makes. Getting it wrong — by conducting an investigation that lacks genuine independence, or by using advisers whose prior relationships compromise their position — can produce findings that are challenged, regulatory scrutiny of the investigation process itself, and shareholder discontent that extends well beyond the original concern.
The Hallmarks of a Situation Requiring Independent Investigation
The concern involves the CEO, CFO, or another member of the executive leadership team: any investigation whose subject sits within the management hierarchy that normally commissions and directs internal investigations cannot be conducted credibly from within that hierarchy.
The concern has potential criminal or regulatory dimensions: investigations with these dimensions require documentation and methodology standards that go beyond standard HR processes, and the appearance of independence is as important as its substance in any subsequent regulatory scrutiny.
The company’s regular advisers have a pre-existing relationship with the individuals concerned: a law firm or audit firm that has worked closely with the subject of the investigation for years is not able to provide the independence that the situation requires, regardless of their individual integrity.
The whistleblower or complainant has specifically raised concerns about internal processes: where the person who raised the concern has expressed doubt about the independence of internal investigation, an external investigator addresses that concern directly.
The board is aware that its findings will be scrutinised: by regulators, by institutional shareholders, by the press, or in litigation — situations where the credibility of the process is itself a material consideration.
Structuring the Independent Investigation
An independent investigation should be instructed by the appropriate governance body — the audit committee, a sub-committee of independent NEDs, or the full board excluding the subject — rather than by management. The investigator should have no prior relationship with the subject and no institutional dependence on the company’s ongoing instruction. The investigation should be scoped, documented, and conducted to the standard required for the most demanding likely use of its findings, whether disciplinary, regulatory, or judicial.
Bond Rees provides this independence as a structural matter. We are instructed by the governance body, we report to them, and our findings reflect what the evidence shows rather than what any constituency within the organisation would prefer it to show.
Board facing a situation that requires genuinely independent investigation? Contact Bond Rees.
