11.2.1 Hofstede’s model

Hofstede’s cultural model is used to explain differences in corporate governance between countries and regions. For example, Haxhi and Van Ees (2010) relate cultural differences to the tendency to develop corporate governance codes, Licht et al. (2005) investigate the relationship between national culture and investors’ legal rights, Hofstede (2004) researches the relationship between culture and business goals, and Li and Harrison (2008a; 2008b) relate national culture to board composition and board independence. As this study focuses on board independence, research by Li and Harrison is used to make the link between national culture and board independence. The four dimensions of Hofstede’s cultural model – power distance, uncertainty avoidance, individualism and masculinity – are described below together with their expected relationship with board independence. This expected relationship is also an indicator of the importance attributed to independence in a society. If demand for independence is high in a society, this society will probably also have a legal framework that is well developed from an independence viewpoint.