Director independence does not produce effective risk monitoring: as the failure of independent director oversight at Lehman Brothers and other large U.S. financial firms shows, independent directors cannot monitor risk when managers, accountants and lawyers keep them in the dark.
Source quote, verbatim
independent directors cannot effectively monitor for risk if they are kept in the dark by the firm's managers, accountants, lawyers, and other persons familiar with its business
From
Painter and Kaal, Initial Reflections on an Evolving Standard Constraints on Risk Taking by Directors and Officers in (2010), III. Cultural Components of Risk Taking and Controlling Risk, p. 25 https://ssrn.com/abstract=1558614 · source PDF
Cite as
Painter and Kaal, Initial Reflections on an Evolving Standard Constraints on Risk Taking by Directors and Officers in (2010). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1558614
Holds when
U.S. style independence defined by lack of financial ties to the company
information flow to the board controlled by insiders
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