Even the Wall Street Journal Seems to Question Director “Independence”

In a front page article on January 20, the Wall Street Journal called to attention the close ties that exist between nominally independent directors and the companies on whose boards they sit.  Prime examples included in the article are:  (1) John Hennessy, the president of Stanford University who serves as an “independent” director at Google while at the same time the company has given Stanford “$24.9 million in donations scholarships and payments for research services and patent licenses” and (2) Andrew McKenna, an independent director at McDonalds who served in that role for over a quarter century while also serving on the board and holding stakes in companies that provided McDonalds with “a combined $71 million of French-fry bags and other goods.”

The article is careful to point out that meet the stock exchange rules governing independence but also notes that McDonald’s shares have “underperformed the restaurant industry over the past 15 years…” McDonald’s naturally responds “[t]his is not a go-along, get-along board.”

While the article never directly condemns the closeness of the ties between directors and the corporations on whose boards they serve it is not difficult to glean the condemnation in its tone.  Commentators have long decried the lack of true independence of many directors (see here and here among many others.  It is encouraging to see the venerable Wall Street Journal taking up the charge.