Much is made of the value of having independent directors serving on a company’s board of directors. These directors are not employed by the company and are supposed to be able to freely challenge management plans and thereby protect shareholder interests. I’m not convinced that independent directors are better than owner directors.
If a director has his or her net worth tied up in company stock, this aligns the director’s interests with those of shareholders. A director who is an employee with minimal ownership actually has interests that are opposed to those of shareholders. An independent director is somewhere in the middle.
As a shareholder, I would place more trust in an owner director than an independent director. I would look for directors whose share ownership is large relative to the income they receive from the company. In this measure, I wouldn’t count stock options as ownership and I would count any form of income whether direct or indirect.
Independent directors may work hard defending shareholders, but then again they may just pay little attention and collect their director’s fees. Or worse, an independent director and the CEO may serve on each other’s board of directors and trade favours.
Independent directors are better than employee directors, but owner directors seem best to me.