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CHAPTER 7BOARD COMPOSITION:KNOWLEDGE VERSUSINDEPENDENCESir Geoffrey Owen, Senior Fellow,The London School of Economics and Political ScienceSNAPSHOT■ In appointing chairmen and non-executive directors, companies need to ensurethat the independence criterion is not given excessive weight; knowledge of theindustry is also important.■ Board diversity needs to be addressed and encouraged but the same principleapplies as above: knowledge of the business is a key consideration.■ Having the right experience, understanding and motivation is more importantthan the number of board members, although too big a board can be unwieldy.TODAY’S BOARDSThirty years ago the boards of most UK publicly listed companies consistedmainly of insiders – current or former executives, plus in some cases thecompany lawyer, or its financial adviser. The board may also have included oneor two independent directors with no commercial link to the company –distinguished people who added lustre to the board, or people with specialexpertise or contacts that were directly relevant to the company’s business;these men (rarely women) saw themselves as friendly advisers, not as monitorsof management. In many cases, the posts of chairman and managing director (inthose days the title ‘chief executive’ was rare) were combined in one person.Today, the typical board, especially in large, publicly quoted companies, isdominated by outsiders. The chairman is generally independent, having had noprevious connection to the company at the time of his or her appointment. Atleast half and usually more of the other directors are independent according tothe same definition. They have a clear responsibility, not just to provide supportand advice, but also to appraise the performance of the executives, and of the47