Independent Directors : the reality behind the numbers
The French regulator AMF just published its report on « Corporate Govenernance and Executive Compensation ». They operate and interact with companies according to the « comply or explain » principle, promoted by the EU Commission. They produce a grid of best practices for governance and executive compensation. One of the key conclusions of this report is that the board members’ selection process is often unclear and not detailed enough.
AlphaValue has long assesed the independency of board members of its entire coverage. It results today in one of the largest and most dynamic panel of data for many European companies. Alphavalue’s methodology in assessing governannce independency is driven by a willingness to be concret and tangible. We have identified seven themes that must be checked in order to guarantee the independance of a board member.
We investigated 5.480 european directors’ profile to find if they match our independency criteria.
The average independent director rate in Europe is slightly increasing year after year. France is below the average rate.
Corporates sound more positive that it actually is, thinking that about 60% of their board members are independant. In reality, Boards’ independent directors rate stands at 40.3% in Europe. This highlights the necessity to cross-checked corporates communication on key ESG issues.
Reasons why board members’ fail to pass our independancy test : Too long service is first issue.
To learn more about AlphaValue’s Board Independence metrics : click here
Founded in 2007, AlphaValue is the world’s leading provider of Independent European Equity and Credit Research. We provide comprehensive, unconflicted research-only (no execution, no corporate finance) coverage of c. 480 European mid and large cap stocks. We have an average of 46% of negative recommendations at any one time. Learn more at www.alphavalue.com