By: Theodore N. Mirvis & William Savitt
The typical board of directors of major U.S. publicly held corporations now includes a greater number and percentage of “independent” directors than ever before. That sounds like a good thing, and in some respects it is. But like most benefits, the independent director wave carries with it corresponding costs. The typical board of directors now includes a greater number of directors who lack detailed operational knowledge about the firms they serve, and a greater percentage of directors who lack firm-specific commitment to their companies and all their stakeholders. That is the danger of independent directors and the subject of this essay. The statistics are striking. According to the Spencer Stuart Board Index, in 1987, 2% of U.S. public companies had boards with only one non-independent director, 15% had two or fewer, and 34% had three or fewer.1 In 1997, 79% of boards had three or fewer independent directors, with 23% having only one and 56% having two or fewer.2 In 2014, 58% of boards had only one non-independent director, 84% had two or fewer, and 94% had three or fewer.3 The progression has been nearly constant over that twenty-seven-year span, as illustrated by the following chart.