The Independence of Board of Directors: A Quest for Legitimacy

20 Pages Posted: 12 Nov 2008 Last revised: 18 Nov 2008

See all articles by Yvan Allaire

Yvan Allaire

Institute for Governance of Private and Public Organizations (IGOPP)

Date Written: September 10, 2008

Abstract

This paper proposes that all organizations governed by a board of directors should enhance the legitimacy and credibility of their board.

The issue is not the much-discussed independence of boards, but their legitimacy and credibility. Independence is meaningful only insofar as it reinforces the legitimacy of a board.

Only when legitimate does a board have the authority and the right to oversee the management of an organization.

Only when credible does a board add value to the organization.

The paper argues that in companies with substantial shareholders (i.e. holding more than 10% of common equity), two forms of legitimacy should, could, be represented on the board:

1. the legitimacy flowing from the process of nomonation and election of independent board members; 2. the legitimacy derived from substantial financial commitment to the firm.

The paper makes a series of specific recommendations.

Suggested Citation

Allaire, Yvan, The Independence of Board of Directors: A Quest for Legitimacy (September 10, 2008). Available at SSRN: https://ssrn.com/abstract=1299131 or http://dx.doi.org/10.2139/ssrn.1299131

Yvan Allaire (Contact Author)

Institute for Governance of Private and Public Organizations (IGOPP) ( email )

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