Corporate Governance & Organization Life Cycle: The Changing Role ...

Figure 1. Issues covered by academic research in the corporate governance arena.

clear that the reforms addressed the monitoring function of the board more than its advising function.

1.2.2. Board Composition: The Emergence
of the Institutional Investor

Over the past 30 years, the power of institutional investors has gained momentum and board composition has shifted toward more independence. A historical perspective on these concomitant trends is useful as it sheds light on the impact of various economic and social forces that have recently shaped board composition. In addition, the emergence of boards composed of a majority of independent directors raised, once again, the issue of the linkage between board composition and firm performance.

With the first trend, the institutional investor emerges as a political force. According to the Conference Board (2007), institutional ownership of the largest 1,000 U.S. corporations has increased from 61.4% in 2000 to 67.9% in 2005. The strengthening of the position of these