2 - Best Practices for Boards of Directors

Summary

This chapter looks at the extensive body of empirical research bearing on the major governance best practices recommended for boards of directors: (1) majority (and super-majority) independent directors; (2) independent board committees for things like audit and compensation oversight; (3) board diversity; (4) separating the CEO and board Chair roles; (5) reducing director commitments outside of the company, often referred to as “director busyness” or “overboarding”; and (6) avoiding interlocking directorships. The chapter finds that these best practices do not produce any real-world corporate outcomes that we care about. The possible reasons for these failures are considered.