General Discussion Topics, page-135647

There is a school of thought that suggests the regulatory standards for determining director independence is flawed ... primarily because "true independence" needs to be measured from the outside. In other words because the test for independence in being run from the inside it can be easily influenced by "self-serving management and directors" themselves - starting with the nominating committee. This can easily "side-step" underlying conflicts of interests formed long before the director is nominated.

This would include the all too obvious examples of say:
* a close social/personal relationship with another director or management
* jobs/contracts/referrals between directors
* (excessive) "joint entertaining"
* informal collaborations/decisions (especially in advance of meetings)
* skipping hiring independent advisors and instead using only the director's experiences
* bias towards certain stakeholders (e.g. major shareholders)

This is what I think you're saying by being "connected at the hip" over time.

I think the problem is that because the determination of independence is relatively subjective (as in what the directors believe - and they are the one picking "independent directors") instead of objective (what is "reasonable" to believe ... and you're saying it is reasonable to believe that because they have worked together yada yada yada their views might be "in common" and that interferes with their supposed "independent view" and therein creates conflict of interest).

There are suggestions that to some degree shareholders should select a portion of directors - so highly likely these directors would be independent of each other and management ... but practically how would that work? Another suggestion (which I like) is the Board nominating committee should disclose the origination of each director - how did they come up with this person. Who referred them? Plenty of arguments that say directors should not come "from the same pool". In other words if Bert is a director, Ernie can not (you like that one?)

I get what you're saying ... just hard to see how it can be changed.