The Movement Toward Independent Directors on Boards: A Comparative Analysis of Sweden and the UK

Manuscript Type: Conceptual Research Question/Issue: The aim of this research study is to theorize about the antecedents of the “board independence norm” (BIN), defined as the standard of having independent directors on corporate boards. The research approach is a comparative analysis of two governance settings – Sweden and the UK. Research Findings/Insights: The UK governance system uses a BIN of power balance from a shareholder perspective, while the Swedish governance system uses a BIN of social connectedness from a stakeholder perspective. However, our findings also suggest that exogenous variables such as pressures to conform to global “best practice” are antecedents of the BIN in the governance codes. Theoretical/Academic Implications: Any global theory of board independence must integrate differences in board structure and ownership patterns, as well as social connectedness in corporate networks. Furthermore, in addition to economic welfare, social welfare and stakeholder balance should also be considered. A synthesis of the “Varieties of Capitalism” and “New Institutional” perspectives considers that corporate governance is embedded in economic, cultural, and social contexts, yet also addresses institutional forces of conformity that are exogenous to the governance system. This seems to be a more promising framework for comparative governance research than “Contingent Agency Theory.” Practitioner/Policy Implications: Multi‐national regulative frameworks should focus on general principles of board independence. Local standard setters might then focus on developing a BIN that fits the specific institutional setting. We provide suggestions about how standard setters in Sweden and the UK can make their BINs more consistent with their settings.