The inside/independent director tension: are we there yet?

Harking back to your childhood, do you remember asking "Are we there yet?" while travelling with your parents? I do, and sense my parents' negotiation skills and patience were tested each time one of their four sons opened their mouth.

Fast forward to 2014. I want to ask the question again, although in a different context: the debate over the value and contribution of inside and independent directors. The debate has been simmering away for years. On the current evidence, it shows no sign of abating or of being resolved. Two recently published articles highlight the problem. The case for independent directors made by Larry Putterman, and the suggestion that independent directors destroy shareholder value, have stimulated a fair bit of discussion. Which one is right? They both can't be, or can they? The tension is palpable.

Many corporate governance researchers—and practising directors and other commentators—seem to have a love affair with counting things and with finding a single "truth" about the way to achieve a desired result. Boards are made up of people who make choices, and they change their mind based on the circumstances before them. Therefore, every board is, to some extent at least, unique. What I can't understand is why we continue to think that a specific structure or composition might make one iota of difference to performance. Surely studies of boardroom behaviours, interactions and activities are more likely to lead us to a credible answer to the conundrum?

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