Opinion piece by Professor Peter Swan: Governance Gone Wrong? The High Cost of Big Boards
Common sense suggests company boards are best composed of directors who hold shares in the business because any poor performance is effectively "skin off their noses". Evidence also implies this is the case.
During the global financial crisis when the ASX200 index tumbled nearly 40%, incentivised boards suffered fewer relative stock price falls. Yet this advantage can be lost if a company's board has too many outside directors or if the board members are too compliant to the chief executive.
They fail to ask the tough questions.