While going through Unit 6, I vaguely remembered an article on the subject of independence that I happened to read this summer. A little Googling helped me find it: “How independent are Husky’s directors?” I found the article interesting at the time, but it’s taken on a new significance in light of this course and the things I have learned.
The analysis of Husky Energy’s Board of Directors illustrates the sometimes dizzying complexity of corporate governance, as well as the ongoing debate about what constitutes genuine “independence”. As some of my classmates have discussed, having independent directors—at least for public companies—is a sensible, logical, and downright unsurprising requirement. It’s a lot easier to trust that someone will honour their duty to act in the corporation’s best interest if that person’s own interest isn’t simultaneously involved. The situation is less clear in the case of private companies, since their scope and structure can be wildly different from that of their public counterparts. It may not be fair or feasible to demand that a small, perhaps family-run private company adhere to an independence requirement.
But given the intricacy and the interconnectedness of today’s corporate world, how realistic is independence and how confident can we be in that label for directors of public companies? As the article explains, Husky classifies the majority of its Board as independent directors—nine out of fifteen, to be exact. While this seems promising, the article’s breakdown of who those independent directors are and the other positions they hold casts doubt on the appropriateness of the independence classification, and indeed, there is skepticism from other organizations. Although I believe that an independence requirement is justified, the Husky Energy Board serves as an interesting example of how dubious independence can actually be.
Interesting article, thanks for sharing. At the end of it the author mentions how SHARE (a shareholders’ rights group) recommended a “withhold” vote against six of the directors that the company labels as “independent”. Despite this, fewer than one percent of shareholders (of which a significant amount are admittedly tied to the controlling Li Ka-shing) voted “withhold” with regards to those directors.
To me, this speaks to the degree to which shareholders are “rationally apathetic” when it comes to the operations of companies that they invest in. Apparently they are willing to follow the lead of the company’s governance. It looks like the impetus for appointing independent directors is not going to be coming from lay shareholders–rather, any systemic change will have to come from statutory impositions.
Thanks for your response, Piers. I agree with you that statutory overhaul is necessary for there to be meaningful change regarding the independence of directors. We’ve talked extensively in this course about how even though shareholders are theoretically the ultimate source of power in a company, their actual role is much more passive. It would be unwise and probably naive to think that shareholders will invest the requisite energy, time, and resources into leading the charge for more independent directors unless having non-independent directors poses a risk of seriously jeopardizing their dividends, and even then, they might just sell their shares.