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Director independence: Going beyond misaligned incentives to resource dependence

Author

Listed:
  • Conan Hom
  • Danny Samson
  • Christina Cregan
  • Peter Cebon

Abstract

Board director independence is critical to achieving and maintaining control to address the agency theory–based issue of interest misalignment between the principal (the organization) and the executives (agent). However, theoretical and empirical research and strategic risk considerations have brought into question the role or relevance that director independence plays in these control task and agency theory domains. We ask, using a quantitative survey method, whether board activity–based applications of independence may be associated with the service task of the board, namely its resource dependence mission. Our findings suggest that the resource dependence duty of the board may be positively associated with some autonomous activities, and yet other activities might be driven primarily by normative practices. Based on this, we suggest that a theoretical scope beyond and greater than agency theory may be needed when reassessing the role of director independence. JEL Classification: M1, O3

Suggested Citation

  • Conan Hom & Danny Samson & Christina Cregan & Peter Cebon, 2022. "Director independence: Going beyond misaligned incentives to resource dependence," Australian Journal of Management, Australian School of Business, vol. 47(1), pages 53-78, February.
    • Handle: RePEc:sae:ausman:v:47:y:2022:i:1:p:53-78
    DOI: 10.1177/03128962211009959
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    More about this item

    Keywords

    Agency theory; black box; board of directors; corporate governance; dynamic capabilities; independence; non-executive director; resource dependence;
    All these keywords.

    JEL classification:

    • M1 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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