The Role of the Independent Director in CEO Supervision and Turnover
29 Pages Posted: 10 Mar 2011 Last revised: 13 Mar 2011
Date Written: January 2011
Abstract
A considerable amount of research has been done on the figure of the CEO, approaching it from many angles. Our analysis focuses on the role played by the independent director in the supervision and turnover of the chief corporate executive. In the process, we have carried out a comprehensive reflection on the independent director, consulting the latest literature and including the results of the most recent empirical evidence. We have noticed that the role of the independent director often goes beyond the tasks that are usually considered specific to this function, namely, supervision of the company’s senior management. However, the directors’ independence cannot be built by requirements. It is a personal quality of the individual that transcends the various problems raised by agency theory. We believe that correct CEO supervision can only be effectively undertaken if the independent directors have these personal qualities. It seems that companies with a larger number of independent directors are more likely to replace the CEO when performance is not as expected. This can only happen if the independent directors enjoy effective independence.
Keywords: Board of Directors, Independent Director, CEO Supervision, CEO Turnover
JEL Classification: M14, M51, M52
Suggested Citation: Suggested Citation
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