Boards: Independent and Committed Directors?

Regulators and shareholders are calling for independent directors. Independent directors, however, have numerous external professional commitments. Using� To- bin’s Q as an approximation� of market valuation and controlling for endogeneity, our empirical analysis reveals that neither external commitments are negatively related to firm� performance nor is independence positively related to it. However,� more precise analyses show that executive directors and family representatives have a positive relationship with Tobin’s Q. In contrast, external executives are negatively correlated with firm valuation. Moreover, the study indicates that the frequency and duration of meetings are negatively affected by the fraction of executive directors on the board. Insiders potentially reduce the need for meetings because of their specialist competence.� The results invalidate rules� advocating independent directors and oppose the engagement of directors with external commitments.Corporate governance: Board of directors; Board independence; Board busyness; External commitments

Director Characteristics and Firm Performance

The traditional methodology examining optimal boards relates a simple board variable� (e.g., independence or board demography) to firm performance, however, ig- noring other board characteristics.� This paper investigates how the education and business� experience of directors affect firm� performance. The sample consists of 1,574 directorships from 224 listed firms� in Switzerland.� Using� OLS� and including control variables, the results show that graduates of minor Swiss universities are negatively related to Tobin’s Q, and industrial knowledge and Tobin’s Q are nega- tively� correlated if the firm� has more divisions.�� In� addition, director fixed effects (or unobserved characteristics) are significant, but improve the explanatory power of the models only by 5 percent.Corporate governance: Board of directors; Director characteristics, Education and business experience