A
relatively new concept in corporate governance that calls for a majority of
board members to be independent from the company. Independence occurs when a
board member has not been and is not currently employed by the company or its
auditor and the board member’s employer doesn’t do a significant amount of
business with the company. Each company creates its own definition of significant. Board independence was given
legal definition and direction in 2002 in the Sarbanes-Oxley
legislation. Stock exchanges, such as the New York Stock Exchange and
the NASDAQ also passed their own rules governing the behavior of their listed
companies.