A well-functioning independent board of directors is a pillar of effective corporate governance. However, establishing and maintaining a truly functioning board remains a challenge for many companies. In response to apparent breakdowns in corporate oversight, policymakers have taken steps to encourage strong and independent boards. Most notably, following a series of high-profile corporate scandals involving the likes of Enron and WorldCom, Congress passed the 2002 Sarbanes-Oxley Act (SOX). SOX, coupled with the subsequent shift in the major stock exchanges’ listing requirements, put in place a number of initiatives to encourage the active monitoring of independent directors.
A large body of … Read more