The UK’s Director Daisy Chain: Empirical Evidence of the Interconnectivity of Directors of UK Publicly Traded Companies

This empirical, interdisciplinary study explores how interconnected directors of UK companies listed on the London Stock Exchange are. This is the first article to deploy graph theory tools to the directors of all 767 UK companies listed on the LSE’s main market. We find that 550 of these companies...

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Bibliographic Details
Published in:European business law review 2023-04, Vol.34 (Issue 2), p.345-376
Main Authors: Rowell, Nicholas, Hardman, Jonathan
Format: Article
Language:English
Subjects:
Boards of directors
Corporate governance
Economics
Golden parachutes
Quantitative analysis
Stock exchanges
Stockholders
Online Access:Get full text
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Summary:This empirical, interdisciplinary study explores how interconnected directors of UK companies listed on the London Stock Exchange are. This is the first article to deploy graph theory tools to the directors of all 767 UK companies listed on the LSE’s main market. We find that 550 of these companies are linked by one large daisy chain that arises as a result of the deployment of independent non-executive directors (iNEDs). However, this network is sparse rather than dense –there are approximately 6 directorships needed to link any two directors together. This clarifies the iNED role in corporate governance – they can help combat managerial excesses unique to a company. However, they are inherently linked, and therefore are less likely to be able to push the boundaries of conventional wisdom within corporate governance. An iNED can protect shareholders against shareholder/director agency costs, but only insofar as they are outliers to governance practice.
ISSN:0959-6941
0959-6941
1875-841X
DOI:10.54648/EULR2023022