Stock exchange rules and state corporate law often rely on the “independence” of a company’s board of directors as a mechanism for policing potential conflicts of interest that might arise between and among the company’s various constituencies.
While stock exchange rules tend to focus on the ongoing independence of directors from management to prevent management from behaving opportunistically at the expense of stockholders, state corporate law also focuses on the independence of directors from a particular stockholder in the context of a transaction with that stockholder and from other directors in the context of derivative actions against such other directors.
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This blog post was republished as, “Lessons From the CBS-NAI Dispute, Part V: ‘Independent’ Directors at Controlled Corporations,” by Harvard Law School Forum on Corporate Governance and Financial Regulation on November 13, 2018.