​How Many Independent Directors Should a Board Have?

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​When I reviewed the updated corporate governance code from Singapore (see my earlier post on this site), I was struck by the guideline that one third of the board members should be independent. Is that enough?

The board needs to have membership that represents and protects the interests of it's stakeholders, and is able to not only provide advice but challenge management directions and actions.

In the case of Singapore, government entities have a major (if not controlling) stake in many large corporations. I can see that such major stockholders need representation on the board. However, their representatives may not meet the definition used in Singapore of independent directors: independent both of management and 10% shareholders.

So, in that context, I would prefer guidelines to the effect that:

The board should have a majority of directors that are independent of management

Except where a single entity owns all the shares, at least one third of the directors should be independent of both management and the 10% shareholders.

What do you think?

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