13.3.1 Conclusion

Independence is a very important subject for the agency theory and TCE theory. These two theoretical frameworks prescribe high levels of board independence with the aim to have strong monitoring in order to improve the (financial) results of the company. The stewardship theory, resource dependence theory and stakeholder theory do not attribute importance to independence. Therefore, the answer to the research question about the aim of having board and director independence is heavily dependent on the importance attributed in the economic theoretical framework that is used. If independence is not important in an economic theoretical framework, the question about the aim becomes less relevant.

Stewardship theorists advise having directors from inside the company on the board, because these directors have knowledge of the company that is needed for high-quality decision-making. Resource dependence theorists want to invite members on the board of companies or organisations, which the company depends on in order to control these sources of dependence. The stakeholder theory focuses on how stakeholders are considered and does not have a view on board composition. With regard to the board composition requirements of the stakeholder theory, the other theories are referred to. It does not attribute importance to independence and has no view on the aim of it.

Besides this economic approach, in the legal approach the aim of independence is concerned with the improvement of the quality of supervision. The lack of good (and independent) supervision was considered to be the main reason behind the corporate scandals at the end of the twentieth and the start of this century. These ideas were based on the economic theory and the agency theory in particular. The aim of independent supervision is to have less misconduct by executive directors and managers.

Research on cultural values shows that the level of board independence is not only affected by corporate governance codes, law, economic circumstances and company characteristics, but by national culture as well. Research shows that individualism, uncertainty avoidance and power distance are positively correlated with board independence. Masculinity is negatively correlated with board independence. Cultural characteristics explain that some societies demand more independent supervision within companies, whereas in other countries this demand is less prominent. Demands, which originate from national culture, lead to or have influence on the levels of board independence. The aim of board independence is therefore to fulfil demands from society or the people within the society with respect to monitoring.

A last aim is provided by the groupthink theory. Groupthink is a ‘desperate drive for consensus at any cost that suppresses dissent among the mighty in the corridors of power’. The consequences or symptoms of groupthink may lead to decision-making of lower quality and a lower performance of the organisation. The theory has received serious criticism, but is accepted based on intuition rather than evidence. In order to prevent the antecedents of groupthink – group cohesion, structural faults in the organisation and a provocative situational context – measures are recommended that are closely related to corporate governance reforms with a focus on independence. Stronger independence criteria, separate NED meetings, the establishment of board committees, maximum tenure, diversity on the board, prohibition of CEO duality, a ban on related party transactions and evaluations are examples of these measures. Therefore, the aim of more independence lowers the probability of groupthink and improves decision-making.