Board independence: Does one size fit all?

The Hayne Royal Commission brought into sharp focus the widespread governance failures at the board level for many financial institutions, despite the fact that the sector exhibits strong board independence. We examine board independence through the lens of founder firms and find that the presence of a founder contributes to better operating performance, a premium rating and helps to manage agency costs effectively despite the lower fraction of strictly independent board members. Stakeholders in the industry - including analysts, investors, ESG data vendors and proxy advisers - that continue to embrace the one size fits all approach risk unduly penalising such companies for low board independence.