The Importance of Board Independence (IVOR nr. 90) 2012/11.5.3:11.5.3 Consequences of independence

The Importance of Board Independence (IVOR nr. 90) 2012/11.5.3

11.5.3 Consequences of independence

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National culture is primarily concerned with the attributed importance of independence and not with its consequences. Social relationships focus mainly on the group processes within the board and their consequences, but not on the consequences of independences. Therefore, these two parts of the behavioural approach of this study are not used to answer the research question about the consequences of independence.

However, the groupthink theory section does focus on the consequences of independence. Measures to decrease the probability of groupthink are closely related to independence requirements. The measures to prevent the antecedents of groupthink can be categorised according to the three building blocks of independence. The person building contains stronger independence criteria. Requirements in the composition/structure building block consist of separate supervisors meetings, tasks of board committees, maximum tenure and diversity. Requirements in the preconditions building block focus on a prohibition of CEO duality, a ban on related party transactions and evaluations. These measures that increase independence are expected to mitigate the antecedents of groupthink, and consequently lead to higher quality decision-making and a better performance of the company. However, empirical research has never been able to replicate groupthink situations completely and therefore it is not clear whether these measures of independence do indeed lead to a better performance of the organisation.

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