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Dear SNA community

Based on our extensive two year review of the largest listed 50 European
companies (by market capitalization, STOXX 50), and their 445 executive as
well as 476 non-executive directors (as of 1 January 2015) who represent
these organizations, we have gained highly relevant insights into the social
ties that connect these decision makers to over 13,000 organizations. 

Hereby we have gone beyond their academic (who studied with whom where) and
professional links (who worked with whom previously), and followed a
multiple tie approach including among others these directors` links to
governments, foundations, think tanks, associations, the military, clubs,
and many other organizations to uncover existing and prior ties. 

Our latest whitepaper (more practitioner oriented, see also
http://www.sonean.com/uploads/media/20744_SONEAN_Whitepaper_Feb_2015_en_fina
l_Web.pdf) , which just represents the tip of the iceberg when it comes to
our overall findings, focuses on the role of so called “independent
directors” as a subset of non-executive directors who have an important
control function in corporations and are supposed to among others monitor
the activities of executive managers /directors. 

In the largest 50 European companies we identified 121 independent directors
(out of 476 non-executive directors) and based on our data see that at least
44 % have prior or existing ties (through university, past mutual jobs or
other institutional ties) to their respective executive managers. From a
social network perspective this leads us to the conclusion that these
independent directors cannot be regarded as independent but be seen more as
socially dependent. 

We therefore argue that existing social ties should therefore be
incorporated in the definition of “independence” and transparently
communicated. Thus it is not just enough to transparently share existing
board memberships when directors join a new board but more importantly to
declare who gave the impetus for joining the board and whether the new
director has existing ties with either the executive or non-executive board
members. 

This increased transparency will be vital to judge true independence and the
objectivity of the hiring process for institutional investors (asset
managers, and asset owners), i.e. shareholders in general. The descriptive
statistics furthermore give you great insights into the dominating
nationalities, universities, majors that executives and non-executives
studied, and the social mechanisms (good old buddies, homophily, revolving
door and others) that are at play between existing independent directors and
executive managers who are connected to each other. 

Enjoy the reading

Murat Ünal
 
                                                                         



SONEAN GmbH
Dr. Murat Ünal, M.B.A, LL.M. 
Bleichstrasse 5
 
61476 Kronberg
 
Tel.: 0049 (0) 6173-702765-5
Fax: 0049 (0) 6173-702765-9

Skype muratuenal

www.sonean.com 

Geschäftsführer: 
Dr. Murat Ünal

Sitz der Gesellschaft: Kronberg im Taunus
Registernummer: HRB 8413
Registergericht: Amtsgericht Königstein

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