The second industry effect analyzed in our paper takes account of the fact that the human capital of an independent executive can be proxied by the performance of the company where the non-executive director is employed as an executive director. One particular issue with relating director quality to firm performance is that the latter may be influenced by a variety of factors beyond managerial control, such as an overall economic downturn or industry shock. Firm performance is therefore a very noisy measure of director quality. .
