Which function do independent boards of directors serve in a REIT?

Independent boards of directors in a Real Estate Investment Trust (REIT) play a crucial role primarily by monitoring managers and protecting shareholder interests. This function is essential because the management team is often responsible for day-to-day operations and strategic decisions that can significantly impact the performance of the REIT.

The independent board serves as a check on management, ensuring that decisions align with the best interests of shareholders. This oversight includes evaluating management performance, overseeing financial reporting, and ensuring compliance with regulations. By fulfilling this role, the board aims to enhance transparency and accountability, which helps build investor confidence and can lead to better long-term performance of the REIT.

In contrast, making investment decisions independently would undermine the very purpose of management, which is to execute the strategy set with the input of the board. Overseeing property maintenance is typically more of an operational task handled by the management team rather than the board of directors. Lastly, while risk management is important in real estate markets, the role of an independent board is not to eliminate risk entirely; rather, it is to ensure that risks are managed effectively and in line with shareholder expectations.