12.3.2 Threats for independence

Table 12-3 shows the results for all respondents. Overall, 59.3% of all supervisory directors consider, any, or a certain, percentage of stock ownership to be a threat to independence. This percentage is much higher for listed companies (80.6%), whereas the difference between non-listed and family-owned companies is relatively small (65.1% and 62.1% respectively). A look at the scores for long tenure and a position as former executive shows that 53.6% and 50.9% of the respondents consider this to be a threat to independence. The fact that relatively more respondents from healthcare institutions (63.9% and 56.9% respectively) and housing associations (61.8% and 68.4% respectively) consider this to be a hindrance to independence, in comparison to the respondents of the listed (58.1% and 41.9% respectively), non-listed (43.9% and 44.7% respectively) and family-owned companies (44.8% and 31.0% respectively), is noteworthy. Supervisory directors in healthcare institutions and housing associations are more concerned about threats to independence than supervisory directors in listed, non-listed and family-owned companies. The fact that there are no shareholders or threats of takeovers that discipline management in these non-profit organisations might explain this relatively great concern regarding threats to independence.

Table 12-3: The scores of the different suggested potential threats to independence and the distributions over the different organisations. Each score indicates the percentage of respondents that regard that particular suggested potential threat as a real threat to independence.

The relationships in the business, family and personal sphere are the last three options. Business relationships are already a part of corporate governance codes and the answers of the respondents show a certain kind of agreement: 69.4% of the supervisory directors admit that business relationships may threaten independence. Whilst business relationships seem to be more important in profit-organisations than in healthcare and housing, the respondents from the three profit-organisations (67.7%, 63.6% and 58.6%) show less of a desire to call a business relationship a threat to independence than the other three groups (75.0%, 77.6% and 80.6%).

For family relationships a similar pattern can be distinguished. The results for healthcare institutions, housing associations and other groups range from 76.3% to 80.6%. The results for supervisory directors of listed companies are within this bandwidth (77.4%), but non-listed companies (56.1%) and family-owned companies (53.4%) show different outcomes. This is not a surprise for the family-owned companies group, because family members are usually represented in all the groups of the organisation, such as employees, shareholders, management and supervisory board. The score of 56.1% for non-listed companies is more notable. An exact explanation cannot be given, but the fact that many non-listed companies originate from family-owned companies and still exhibit characteristics of a family-owned company might be a reason for this result.

The last relationship addressed here is the social relationship. Not included in any corporate governance code or other list of terms of disinterest, but considered to be an obstacle to independence. For example, a supervisory director is still qualified as independent in a situation where he supervises the

CEO, who has been his best friend since the age of ten. The same holds for a supervisory director who plays golf with a CEO on a weekly basis, because they are friends from university. To 55.6% of the respondents, such a relationship may indeed be a threat to independent supervision. However, the social relationship is considered to be less bothersome than family and business relationships. Furthermore, it can be derived from the results that supervisory directors in healthcare institutions (69.4%), housing associations (61.8%) and other organisations (58.3%) attach more importance to the inclusion of social relationships in a list of terms of disinterest. For non-listed companies (49.2%) and family-owned companies (43.1%) a minority of the respondents see an issue when monitoring a friend. The score for listed companies is slightly higher (54.8%), but still much smaller than for the three non-profit groups. The reason why non-profit organisations are more concerned about independence is suggested above: due to the absence of shareholder pressure and the threat of takeovers, independent monitoring is more important for these organisations. Furthermore, healthcare institutions and housing associations are more vulnerable to public opinion than the three profit organisations, because they rely on government support to a significant degree.

In addition, it can be observed that, on average, family-owned companies are less concerned about threats to independence than listed and non-listed companies. This supports the hypothesis of altruism, that independence in family-owned companies is of lesser concern because the interests of shareholders and management are better aligned. This better alignment is caused by the fact that the family holds a significant stake in the company. Furthermore, these family-owned companies are generally focused more on the long term and consequently protect the interests of other stakeholders better.