Boards of directors of European companies have ‘satisfactory’ levels of independence but fewer than half of board chairmen meet common standards of independence, according to a study by the Expert Corporate Governance Service (ECGS).
ECGS, which offers corporate governance research and proxy voting advice to institutional investors, says in its annual report that an average of 52 percent of directors at European publicly traded companies can be considered independent. The level is just above its recommendation of a minimum of 50 percent.
The service also said the number of executive directors on European boards, as measured by the STOXX Europe 600 index, was a ‘quite acceptable’ 14 percent of all directors. The remaining 34 percent of board members were affiliated or potentially conflicted members that don’t meet ECGS’ criteria for independence.
However, only 43 percent of the boards had an independent chairman, which ECGS considers basic best practice. About 31 percent of boards are led by non-independent chairmen and, in 13 percent of cases, the chairman is also the chief executive officer of the company. About 10 percent of chairmen are former CEOs and 3 percent are executive chairmen.
The Netherlands has the highest rate of independent chairman, at 94 percent, followed by the UK, at 65 percent. Spain and Luxembourg had no independent chairman on the companies tracked. France had the second-lowest score, with only 5 percent of its chairmen considered independent.
