It's long been assumed that the mushroom is a good analogy for how management funnels information to independent directors: the latter are kept in the dark and fed manure. An interesting recent paper, however, found that:
... independent directors earn positive and substantial abnormal returns when they purchase their company stock, and that the difference with the same firm's officers is relatively small at most horizons. The results are robust to controlling for firm fixed effects and to using a variety of alternative specifications. Executive officers and independent directors make higher returns in firms with weaker governance and the gap between these two groups widens in such firms. Independent directors who sit in audit committees earn higher return than other independent directors at the same firm. Finally, independent directors earn significantly higher returns than the market when they sell the company stock in a window before bad news and around a restatement announcement.
This suggests that independent directors may have almost as good access to information as executive officers, at least at firms with strong corporate governance. It further suggests that information asymmetries are no longer as significant a barrier to director primacy as they once were.
