Análisis de las secuencias de proteínas

To achieve better firm performance, the proponents of agency theory suggest that the board of directors should be configured largely, if not exclusively, with independent directors, outside of management (Milliken & Martins, 1996; Muth &

78 Donaldson, 1998), which is typically required in many countries. For example, Lorsch and MacIver (1989) highlight that 74% of directors are outsiders and among them, 69% are non-management personnel with no other contacts with the organisation. Outside directors in India are defined as directors who are not paid employees of the company or do not have any family association with the company (Jackling & Johl, 2009, p. 506), which is a broad definition that summarises non- executive directors and independent directors in a firm. Clause 49 of the Listing Agreement by the SEBI describes the optimum combination of inside and outside directors for listed companies. For example, in a company with an executive chairman at least 50% of board members should be outside directors. This requirement comes down to 30% for companies having a non-executive chairman (SEBI, 2004).

The Listing Rules issued by the CSE require listed companies in Sri Lanka to maintain a proper mix of executive and non-executive directors on their boards. Therefore, boards should consist of a minimum of two non-executive directors or one third of the total number of directors, whichever is higher. According to the Banking Act Directions, the number of executive directors shall not exceed one third of the number of directors of a bank’s board. Once there is compliance with the above rule, one of the executive directors can be appointed CEO of the bank. In addition, a bank’s board should have at least three independent non-executive directors or one third of the total number of directors, whichever is higher (CBSL, 2013, p. 177). Finance Companies (corporate governance) Direction No. 3 of 2008 mentions that the number of executive directors in Sri Lankan finance companies shall not exceed one-half of the number of directors of the board. If the company complies with above rule then one of the executive directors can be appointed CEO of the company. Furthermore, the number of independent non-executive directors of the financial companies’ board shall be at least one fourth of the total numbers of directors (CBSL, 2012b, p. 69).

It is assumed that outside directors provide more effective monitoring compared to inside directors. Lorsch and MacIver (1989, p. 17) state that “there has been a growing predominance of outside directors who are there not only to provide a new perspective to top management’s thinking, but also to provide the necessary oversight only possible from an outsider”. Mishra and Nielsen (1999, p. 22) find

79 that “… independent boards make greater use of compensation contracts to bring the financial interests of managers in line with those of shareholders”. Abdullah (2004) states that boards of Malaysian companies are generally dominated by the outside directors and suggests that the structure of the board of directors is largely independent from its management due to the absence of any dominant personality. Furthermore, Cicero et al. (2008) also state that two-thirds of USA firms change their board’s independence once in a two-year period.

Board independence plays an important role in developing countries and emerging markets as it is more effective in aligning the interests of managers and shareholders (Claessens & Yurtoglu, 2012). In Sri Lanka, investors are now highly concerned about non-executive directors on corporate boards. The corporate governance survey in Sri Lanka (2007) states that 87% of respondents consider balance between non-executive directors and executive directors is important in Sri Lankan listed companies. In the corporate governance survey in Sri Lanka (2007), more than 90% of participating companies had non-executive directors on their boards. Unlike Sri Lanka, this situation was not always there in India (Varma, 2005). In the Indian context, surprisingly, board independence is insignificant for firm performance across four categories of Indian firms: public sector undertakings, stand-alone firms, private business group affiliated firms and subsidiaries of foreign firms (Dey & Chauhan, 2009). Due to the surprising results of this study, its authors called for more detailed studies in this area. A study of top Indian companies showed that a greater proportion of outside directors on boards is associated with improved firm performance (Jackling & Johl, 2009). However, Kota and Tomar (2010) state that non-executive independent directors fail in their monitoring role. Chugh et al. (2011) identified that a high proportion of independent directors (excessively autonomous board) leads to lower firm performance.

Theoretically, from an agency perspective, it is claimed that a greater proportion of outside directors on the board should have a positive effect on performance. However, mixed results have been reported for the empirical studies undertaken on the relationship between outside directors and firm performance. Agency theorists argue that independent boards will increase firm performance (Dalton et al., 1998; Lynall, Golden, & Hillman, 2003; van den Berghe & Levrau, 2004). Uzun, Szewczyk, and Varma (2004, p. 33) state that the “… number of independent

80 outside directors increased on a board and in the board’s audit and compensation committees, the likelihood of corporate wrongdoing decreased”. In this regard, Dahya, Dimitrov, and McConnell (2008) report a positive relationship between firm performance and the proportion of outside directors. As illustrated by Dahya et al. (2008), there is a positive relationship between firm performance and the proportion of outside directors. However, some studies undertaken on corporate governance and firm performance find that there are no facts to confirm an independent board leads to enhanced firm performance (Bhagat & Bolton, 2008; Dahya et al., 2008). Meanwhile, Ashbaugh, Collins, and LaFond (2004) reported a negative relationship between the cost of equity and independence of a board. Therefore, it is important to investigate this factor further as there is general concession on the need for balance between inside and outside directors of the firm.