Most publications define it in terms of whether you are an employee of the company, whether you have received payment for services rendered to the company, whether you have interlocking directorships on the board, or whether you are an immediate family member of management. There are endless kinds of relationships that could affect a board member's ability to act independently and in the best interest of shareholders. Yet relationships of the sort I just mentioned are considered independent and completely acceptable under guidelines issued by CalPERs, NACD, and the Business Roundtable. If the possibility for a conflict between management and boards exists because of a board member's relationship with management, then that relationship should be disclosed so that shareholders can assess whether it is material enough to cause a problem. Every public company should have a nominating committee consisting exclusively of independent directors to consider such possible problems among all new candidates for board membership.
Relevant experience is the second pillar of sound corporate governance.
The perfect board is one in which each board member brings a unique set of skills that, when combined with those of other members, creates an advantage for that company over its competitors. Today's world is too complex for corporate myopia. Myopia results when a company attracts only directors whose experience is in similar companies or in the same industry. Many exogenous factors not directly related to a particular industry can affect a company. Populating a board with individuals having similar backgrounds may result in a failure to see change and to be able to adapt to it.