The Downside to Full Board Independence

In recent years, there’s been a marked trend toward corporate boards on which the only insider is the CEO. But there’s a problem with that kind of board independence: New research finds it’s associated with poorer financial performance.

Olubunmi Faleye

WINTER 2017

High-profile accounting and corporate governance scandals have resulted in significant changes in the structure of corporate boards of directors, especially the move to (nearly) fully independent boards — that is, boards on which the CEO is the only employee director. According to data from the proxy advisory firm Institutional Shareholder Services, 36% of S&P 500 companies had no other employee director besides their CEOs in 1999. The percentage ...