Independent Directors and Controlling Shareholders

Bebchuk, Lucian Arye; Hamdani, Assaf

doi:10.2139/ssrn.2741738

Cited by 31 publications

(32 citation statements)

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“…Recently, however, the argument of enhancing structural independence of independent directors in controlled companies has resurfaced, also in the light of the now more common ownership structure in which institutional investors' holdings are so significant (Gilson & Gordon, 2019). Bebchuk and Hamdani (2017) proposed a system by which public investors have a veto over the election over a certain number of directors (which are still elected by the controlling shareholder) and have the exclusive right to re-elect such director (Bebchuk & Hamdani, 2017). The system was put into practice in Israel; a similar system, limited to the vetoing phase, also exists in the UK (Strampelli, 2018).…”

Section: Election Of Independent Directors In Controlled Companies: Cmentioning

confidence: 99%

“…The clear intent of the legislator was to curtail expropriation by controlling shareholders, by creating a category of super-independent directors or, as now termed, 'enhanced independence directors' (Bebchuk & Hamdani, 2017;Strampelli, 2018), who actually do seem to act accordingly to their enhanced independence (Marchetti, Siciliano, & Ventoruzzo, 2017;Passador, 2018;Marchetti, Siciliano, & Ventoruzzo, 2020).…”

Section: Italian Rules On the Election Of Directors By A Minority Of mentioning

confidence: 99%

“…Notwithstanding the fact that the definition of directors' independence usually includes independence from the controlling shareholder, given that they are usually elected by the controlling shareholder, their monitoring ability may be weakened. Therefore, recent literature has stressed the need to increase the effectiveness of board monitoring over management behavior and identify mechanisms to reduce agency costs in the context of companies having controlling shareholder (Bebchuk & Hamdani, 2017). Some jurisdictions have gone so far as to provide that at least some independent directors are elected by minority shareholders.…”

Section: Introductionmentioning

confidence: 99%

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Enhancing Board Monitoring Tasks: The Effect of Minority-Elected Directors

Masi¹,

Zorzi²

2020

IJBM

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In companies with a controlling shareholder the agency relationship between controlling shareholders and minority shareholders poses significant issue. Managers may pursue, rather than the interests of the company as a whole, the interest of the controlling shareholder. When there is a controlling shareholder, independent directors may not prove sufficient to monitor the management behaviour, given that they are ultimately appointed by the same controlling shareholder whose possible opportunistic behaviour they are meant to constrain. Therefore, minority shareholders may be given appointment rights to the board: directors elected by minority shareholders may work as a corporate governance mechanism that fosters the board’s willingness and ability to monitor managers’ behaviour, on the assumption that managers are appointed by the controlling shareholder. This paper examines empirically whether having a minority-elected director on corporate boards increases the ability of the board to monitor management behaviour. Using a sample of the largest listed Italian companies in years 2008-2017, we find that minority-elected directors have a positive and statistically significant effect on board monitoring tasks. We also document that this effect is higher when they are elected by institutional investors. Our results have important implications for policy makers and, more generally, corporate governance best practice in all contexts in which companies have a concentrated ownership structure.

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Section: Election Of Independent Directors In Controlled Companies: Cmentioning

confidence: 99%

Section: Italian Rules On the Election Of Directors By A Minority Of mentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Enhancing Board Monitoring Tasks: The Effect of Minority-Elected Directors

Masi¹,

Zorzi²

2020

IJBM

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“…178 In controlled companies, independent directors should be 'minority directors'. 179 While minority directors are a common device for the protection of minority shareholders in closed companies (through cumulative voting procedures), they are rare in public companies. 180 The only real alternative for majority-of-minority votes at board level, however, is the approval by a committee of minority directors.…”

Section: Committee Of Minority Directors As An Alternativementioning

confidence: 99%

“…181 Such system of minority directors could be designed in several ways. 182 Minority shareholders could have an exclusive right to either appoint minority directors or to nominate them. In most jurisdictions, directors are removable at will.…”

Section: Committee Of Minority Directors As An Alternativementioning

confidence: 99%

Self-Dealing by Controlling Shareholders: Improving Minority Protection in Light of Article 9 c SRD

Hallemeesch

2018

European Company and Financial Law Review

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Controlling shareholders may cause a company to enter into transactions with themselves or one of their subsidiaries, thereby expropriating minority shareholders. General principles of company law, such as board autonomy, often do not adequately constrain controlling shareholders. Moreover, Belgian, French and Dutch courts apply deferential standards of review to related party transactions, while approval procedures in these jurisdictions are also flawed. A recent amendment to the Shareholder Rights Directive requires adequate protection of minority shareholders against self-dealing. Member States may subject related party transactions to a majority-of-minority vote, the approval of independent directors or judicial review. This paper discusses the efficiency of each of these mechanisms.

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Ownership concentration and board structure: Alignment and entrenchment effects in an emerging market

Lizares

2022

Manage Decis Econ

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This paper explores if controlling shareholders' influence on the board structure allows entrenchment or alignment effects to prevail. Informed primarily by the principal–principal theory and supported by the stewardship and resource dependence theories, this study samples 235 publicly listed Philippine firms from 2015 to 2019 and employs instrumental variable fixed effect panel and probit regression analyses. Results show ownership concentration is positively associated with the proportion of nonindependent, nonexecutive directors on the board and the likelihood of CEO duality, indicating that boards are not completely independent and are likely to generate entrenchment effects.

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Independent Directors and Controlling Shareholders

Cited by 31 publications

References 0 publications

Enhancing Board Monitoring Tasks: The Effect of Minority-Elected Directors

Enhancing Board Monitoring Tasks: The Effect of Minority-Elected Directors

Self-Dealing by Controlling Shareholders: Improving Minority Protection in Light of Article 9 c SRD

Ownership concentration and board structure: Alignment and entrenchment effects in an emerging market

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