Powerful independent directors

Shareholder valuations are economically and statistically positively correlated with independent director power, gauged by a composite of social network power centrality measures. Powerful directors’ sudden deaths reduce shareholder value significantly; other do not, consistent powerful directors increasing firm valuations. Further tests associate more less value-destroying mergers acquisitions, free cash flow retention, CEO accountability, earnings management. We interpret these findings as better detecting countering missteps because access to information, greater credibility in challenging errant top managers, or both.