For a whole bunch of really good reasons, shareholders have been demanding more independent directors at public companies. Director independence has been a major problem at virtually every major fraud that I can think of, and an independent board is one of the best checks against a potentially unscrupulous management team.

But now shareholders are going a step further. According (subscription required) to the Wall Street Journal, they want directors who aren't CEOs at other companies either.

A big part of the reason behind the trend is the increased demands of Sarbanes-Oxley, which place great responsibility on outside directors to monitor internal controls at the company. The days of collecting a a nice stipend and going to a couple meetings per year are over, and shareholders want people who can devote the necessary time to being stewards of shareholder interest.

Another problem with having CEOs from other companies serve on boards is that they may be conflicted. Given that most companies set executive compensation based on the pay levels of other companies, there is a strong incentive for CEOs to work to boost pay at other companies and, in turn, their own pay packages.

Today, many companies are actively seeking up and coming executives at other companies to serve on their boards. These executives may have a fresher perspective, and can also take what they learn in the boardroom back to their jobs at their current employers.

The role of the director in America has changed forever, probably to the long-term benefit of outside shareholders. They days of the imperial CEO are mostly over, and CEOs are being held accountable to an unprecedented extent.