INDEPENDENT DIRECTORS AND NEW CORPORATE GOVERNANCE PARADIGM (PROS & CONS OF INDEPENDENT DIRECTORS)
INDEPENDENT DIRECTORS AND NEW CORPORATE GOVERNANCE PARADIGM (PROS & CONS OF INDEPENDENT DIRECTORS)

Summary/Abstract: In the last few decades there has been a powerful trend in favor of independent directors for public firms. For larger public companies around the world, it is the norm for the board of directors to include “outside” directors who are not involved in the day-to-day running of the company but are generally expected to take a central role in overseeing company managers. This paper presents the major drivers of the trend towards board independence and the main reasons for greater role of independent directors and stricter standards of independence, their number and diversity. The shift towards independent directors is reflected not just in the numbers or percentages but also in the strengthening of various mechanisms of director independence. The cummulative effect of the considered reasons led to a significant reconceptualization of the board’s role and structure. The effect of the reforms on the board’s role is to make the role of the independent directors more important than ever. Despite the fact that evidences that connect the increased presence of independent directors to shareholder benefit are weak, the expectations of independent directors has become too large.

• Details
• Contents