Why is independence important for boards in corporate governance?

• A. Independence fosters objective governance by avoiding material ties to management or major shareholders.
• B. Independence ensures directors have the most information from management.
• C. Independence guarantees the board will approve management's wishes.
• D. Independence lowers the cost of audits.

Answer: (A)

Independence ensures objective governance by removing material ties to management or large shareholders, so directors can assess strategy, performance, and risk impartially. This separation helps prevent conflicts of interest from coloring judgments, enabling more effective oversight and protection of shareholder interests. That is why independence best captures the reason boards must stay free from undue influence to exercise sound judgment.

Information flow can still come from management, but independence is not about having the most information; it’s about exercising judgment free from improper incentives. And independence does not guarantee that the board will always approve management’s wishes or automatically lower audit costs—those outcomes depend on broader factors like strategy alignment, risk, and market conditions.