The Rise of the Independent Director: A Historical and Comparative Perspective

The term “independent director” is indiscriminately used in the international discussion about corporate governance but there is no universal definition and the context in which independent directors operate in each jurisdiction is highly path-dependent. If the main task assigned to the independent directors is to monitor management as a means to solve the classic agency conflict between managers and dispersed shareholders (owners), independence from the entrenched CEO of the stereotypical US Berle-Means corporation seems to be the most important criterion. If, on the other hand, the directors’ task is defined predominantly as protecting minority shareholders against a controlling block holder in an archetypical Continental European or many Asian companies, independence from the latter will be the decisive characteristic.