# kaal:claim:1558614-020

**Claim.** 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.

**Type.** failure  **Support.** argued

**Holds when.**

- U.S. style independence defined by lack of financial ties to the company
- information flow to the board controlled by insiders

**Source quote.**

> 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, page 25

**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

**Verify.** sha256 of source PDF `e898211630f4116879329d6de8397523dca5b066864147421aa5cbc7429dc83b` at https://raw.githubusercontent.com/wulfkaal/Academic-Papers/main/papers/pdf/Painter%20and%20Kaal%20-%202010%20-%20Initial%20Reflections%20on%20an%20Evolving%20Standard%20Constraints%20on%20Risk%20Taking%20by%20Directors%20and%20Officers%20in.pdf

**Failure mode.** uninformed independent director  (family: board-and-oversight-failure)

**Topics.** corporate-governance, disclosure, compliance, risk-and-incentives

**Keywords.** board-independence, information-asymmetry, lehman-brothers, risk-monitoring, sarbanes-oxley

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