Guido Ferrarini, Marilena Filippelli Independent directors and controlling shareholders around the world (01 May 2014) Available at ECGI: http://ecgi.global/working-paper/independent-directors-and-controlling-shareholders-around-world
In this paper, we examine independent directors as a legal transplant from dispersed ownership systems to concentrated ownership ones. We focus on Continental Europe, Japan, Brazil, Russia, India and China. Our main thesis is that independent directors have a different and relatively narrower role to perform in controlled corporations.
We also argue that in the law and practice of controlled corporations independent directors often play an even weaker role than economic theory would predict. In order to prove our thesis, we compare the legal regimes applicable to independent directors across countries. We find that the notion and functions of independent directors vary remarkably across our sample jurisdictions. Firstly, the role of independent directors is not always
specified. Secondly, independent directors often play a role in audit committees and, less frequently, in nomination and remuneration committees. However, they are rarely tasked with the vetting of related-party transactions and other conflicts of interest situations. Moreover, controlling shareholders often perform some of the functions that are typical of independent directors in diffuse ownership, such as the hiring and firing of Managers and the setting of their remuneration. We conclude that the weak role of Independent directors in several countries shows that they are often appointed mainly to accommodate
investors? preference for western-style corporate governance.
Majority of Minority (MOM) approval is a common mechanism used in many jurisdictions to control conflicts of interest in related party transactions. Recently, in M & F Worldwide, the Delaware Supreme Court held that MOM approval in a...Read more
This essay, prepared for a volume on related-party transactions (RPTs), explores the economic, legal and policy challenges associated with RPTs in state-owned enterprises (SOEs). We show that RPTs in SOEs differ from RPTs in privately owned...Read more
This paper analyses the regulation of related party transactions in the UK through two comparative lenses, one external, the other internal. The external comparison is between English law and the law on RPTs in the United States, especially in...Read more
Germany Inc. was an idiosyncratic form of industrial organization that put financial institutions at the center. This paper argues that the consumption of private benefits in related party transactions by these key agents can be understood as a...Read more