OK, so I am beginning to see the
light at the end of the data mining tunnel. Another two weeks and hopefully it
will be done.
Amid the data mining a recent blog
post from Robert Goddard on Corporate Law
and Governance noted that a report from The
Financial Times, which also discussed female quotas on boards, highlighted
that a draft EU directive suggested caps on directors of banks serving on
other boards - no more than two non-executive positions for
executives and no more than four executive positions for anyone.
My data compromising of 30 firms from the FTSE 100 suggests that this would
have little to no impact on English directors, especially those on
banking boards. Anecdotal evidence suggested that where directors hold more
than three positions most of those positions are held on boards abroad rather
than in the UK.
As for multiple directorships or interlocks on banking boards it seems such a
proposal will have little impact on UK banks. For example, The Royal Bank of
Scotland's (RBS) executive directors in 2006 held between them three
multiple directorships with a total of seven executives serving throughout that
year (0.42 directorships per director). For 2010 there were no multiple
directorships held by any executives throughout the year.
Non-executives portray a potentially different story; but again using RBS as an
example throughout 2006 eleven non-executives served on the board with a total
of twenty-seven other directorships held between them (2.45 per director). In
2010 however, ten non-executives served throughout the year with a total of
sixteen other directorships (1.6 per director).
Although interlocks are unsurprisingly higher for non-executives and not
uncommon amongst executives (although RBS is perhaps not the best example of
this) neither seem to trouble potential thresholds suggested by the EU.
However, just because UK boards rarely break the suggested thresholds one would
still not support a cap on interlocks. Boards need to be dynamic to respond
to changing conditions and trying to straight-jacket boards is not a
feature of a modern economy.
For more commentary on directors' duties and
shareholder litigation, visit Gibbs: Law and Life, a blog centering on directors' duties
and company law, particularly on interpretation and practicality of directors'
duties in the 21st Century.
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