Companies on the brink of insolvency are increasingly appointing independent directors to their boards as they prepare for a bankruptcy filing, but their neutrality is disputed by creditors, lawyers and academics.
The companies label these directors as disinterested experts who act to maximize value for creditors by investigating the reasons for the bankruptcy, dealings between the company and its owner, and other matters. The directors input carries significant weight with bankruptcy judges, who tend to defer to their findings that a particular settlement or transaction is fair, years of court rulings show.
The problem, according to new research, is that some of these directors are biased in favor of the companies that hired them. The …
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