The impact of the seniority of directors on their independence

Abstract

This research examines the impact of the seniority of independent directors of 178 Canadian companies on the compensation paid to their senior executives and the financial performance of these companies. We assume that, as the seniority of directors usually defined as “independent” increases, their independence is compromised because of the relationships they build with company executives. Therefore, seniority should be taken into account in studies using director's independence as a variable. Results show that the seniority of independent directors has a positive impact on the compensation of senior executives but no significant impact on the financial performance of companies.