By non executive directors we address those members of the BoD who aren't part of the executive management team, and aren't affiliated to the company, nor are employees. The main feature that distinguishes them from independent directors, is that NEDs are allowed to hold shares, while independent directors aren't.
I think that this is not totally correct. Non executives directors are directors who don't have executive functions. They are not managers of the firm, but they are linked or someway affiliated to the firm (notice that Andrea Agnelli is a non executive director!). Instead independent directors are the ones not affiliated to the company, neither actual nor ex employees.
Independent directors are a particular distinction of non executive directors (or outside directors),together with affiliated directors,but differently from this category, the independent directors have to respect some criteria of independence from the organization (not to be an employee or a manager and so on..).
A non-executive director is a member of the board of directors of a company who does not form part of the executive management team. They are not employees of the company. Independent director, sometimes known as a outside director, is a member of a board of directors, does not own shares in the company.
Outside director or non- executive d. is a category of board members, we can distinguish :Independent director that is a board member without linkages with the firm or its member or relations with the external auditor of the company. and affiliated ex. director with linkages with the company.
Independent director is a director member of the Board of directors who doesn't have a material relationship with company or with related people. But usually they are too influenced by the ceo and instead they should be independet. The main different with NED is that they should not own shares of company for which they are independent directors.
Non-executive directors are members of the board of directors not affiliated with the company. They are outside directors not involved with the day-to-day activities of the company, with the role of monitoring executive activities and developing company's strategy. They can hold company's shares. Instead, an independent director has to respect the famous independece criteria and moreover cannot hold shares of the company
A non ecxecutive director is a member of the Board of a company who is not at the same time a manager of that firm. A non executive director is independent when he doesn't own shares of the firm and he has not any kind of relationship or link with the firm. For example an employee, a consultant of the firm or a member of the controlling family cannot be considered as independent.
In my opinion, A non-executive director (or outside director) is a member of the board of directors of a company or organisation who does not form part of the executive management team. A non-executive director (NED) typically does not engage in the day-to-day management of the organization, but is involved in policy making and planning exercises.
In addition, non-executive directors' responsibilities include the monitoring of the executive directors, and to act in the interest of any stakeholders. Also called external director, independent director and outside director.
While an Independent director (also sometimes known as a outside director) is a director (member) of a board of directors who does not have a material or pecuniary relationship with company or related persons, except sitting fees. Independent Directors do not own shares in the company.
Hence, the main difference between Non Exectuive Directors (NED) and Independent Directors is NED do own shares but Independent Directors do not own shares in the company
A non-executive director can be an inside director by owning shares of the company, while a director has to be considered independent when there is the presence of positive criteria and/or absence of negative criteria, as we saw in class. An independent director must be for sure an outside director, he/she cannot own shares of the company and his/her presence in the Board is important to protect the interests of minority shareholders and/or the other stakeholders. A family member of the ultimate controlling party could be a non-executive member of the Board, whilst he/she could never be an independent director.
Non executives directors are directors who don't have executive functions. They are not managers of the firm, but they are linked to the firm. Instead independent directors are the ones not affiliated to the company, neither actual nor ex employees.
Non-executive directors are members who are not owners and/or managers inside the company, while indipendent directors are members who do not have a material or pecuniary relationship with company or related persons, except sitting fees.
Non executive directors are the members of the board who are not members the executive team, and they are not affiliated to the company; they can hold shares of the company, while independent director can not.
non executive directors are members of the board and are not managers at the same time; they can be also independent when he has not any relationship or link with the firm; (in theory they should not own shares but practically it can be possible that they own them)
The main differences are that, independent directors are the ones not affiliated to the company, neither actual nor former employees. (they have to respect various requirements) Instead, it is defined non-executive director a member of the board of directors of a company or organisation who does not form part of the executive management team, and so who does not contribute to the elaboration of the corporate strategy.
Non-exective directors (or outside directos) are those who are member of the board of directors, but does not form part of the executive managment team. Non-executive directors are often considered the same as independent directors, but the main difference between them is that non-executive directors can have company;s share, while independent - no.
In my opinion, A non-executive director is a member of the board of directors of a company or organisation who is not manager. A non-executive director can be called external director, independent director and outside director. While an Independent director is a director also member of a board of directors who does not have a material or pecuniary relationship with company or related persons, except sitting fees.
In my opinion non executive directors are members of the board and are not managers at the same time, however they can be also independent when he has not any relationship or link with the firm.
Indipendent directors are members with no relationships with the firm ( material or pecuniary) which are remunerated on the base of their presence during the board meeting, while non-executive directors are members of the board who shouldn't own any shares of the company and don't take any decision in day by day activity.
Guys i have one doubt, do you think it's normal that also an independent director (Gian Maria Gros-Pietro) holds shares of the company? Can he be considered really independent?
I think that it's not a bad or strange thing. An independent person could be more neutral and impartial and take decisions in a more objectively way. So, according to me it is a good situation for every firm to have an independent director.
Giacomo, I think that Gian Maria Gros-Pietro is allowed to own shares in the company because he is a NON-executive indipendent director, therefore he does not form part of the executive management team. The legislation makes a difference between executive and non.executive indipendent directors on the grounds that the first are members of the board who also serve or previously served as executive managers of the company and are not generally allowed to own shares . what do you think , instead, of possible influences due to Gros Pietro's primary role in Intesa Sanpaolo SPA?
The primary interest of an independent director must be aimed at preserving the interest of shareholders. So if I were in the shoes of Mr Gros-Pietro I would own some stocks to align my interest to that of shareholders. Moral of the story: I do not think there exists a conflict of interests in this case.
I agree with you, I don't think there's a conflict of interest because this situation allows to more alignment between ownership and control, while a conflict of int. occurs when the interest of the director tends to interfere with the interest of the firm. .In pursuing its own interest Gian Maria Gros-Pietro pursues the interest of the other shareholders and of the company.
I understand your point guys, but it seems to me that in these answers you're thinkin just through the lenses of the shareholders theory of the firm. The only objective of the firm is to serve it's shareholder's interests and according to the agency theory some incentives are needed in order to align owners and managers' interests.
But what happens the organic theory, according to wich the company has to take in account all its stakeholder's interests creating sustainable profit in the shor and in the long run? Let's make an example:
The management is going to make a financial operation that would bring a big amount of money for shareholders in the shor term, while destroying value for other stakeholders in the long run. Being Gian Maria Gros Pietro also a shareholder, is there a conflict of interest? which interests would he serve?
I think that it's not a problem because, as we've seen in theory, there is a distinction between the existence of a conflict of interest and taking advantage from that conflict..we've seen the "weighing scale proposing different situations, including the one in which the creation of the value for the firm can be more important than a particular and personal interest. So, why it could not be the case of Gian Maria Gros Pietro to be in this situation?
Federica S. has a point. Giacomo, you also have one! But BoD is appointed through weighted votation among relevant shareholders, am I right? So even if it sounds strange off course he may peacefully be considered an independent investor that owns massive shares of the group (that translates in a massive contribution to its business) and excercises his RIGHT to seat at the board representing his own, independent, interest along with the other shareholders who supported is appointment (if any).
Giacomo, I think that an independent director should not own shares of the company to be considered truly independent. He/she should not act in his/her own interest but in the interest of all the stakeholders (at least as much as possible) and of the firm itself, according to the "Economia Aziendale" theory. Therefore, the risk is that, owning shares, he would have also a personal interest in dividends and capital gains, opening the door to a possible conflict of interest. Thus, in my opinion, I don't think that giving shares to independent directors would be the best solution.
I don't think it is a problem for indipendent directors to have shares of the firm. On the contrary, if the indipendent directors own shares of the company they could be more involved in their activity and their interests could be more alligned with those of the shareholders they represent
Actually I think it is not so strange! I agree with Federico, independent directors have to respect independence criteria but they can have shares and so be better aligned with the interests of shareholders.
I think that it is not strange that also independent directors own shares in the firm, especially if one considers that it is quite common in the practice to adopt for this category long term incentives in the form of "performance share plans".
On my view is important to understand if the firm follow the one tier system or the two tier system because in a one tier system is pivotal that the independent directors are truly independent. The independent directors in fact should control the executive directors.
In theory they should not own shares, but in practice they own them and in this way they are more involvded in the activities of the firm and in the interests of the shareholders
I don't think we can talk about conflict of interests in this situation. Because if you think to the role of independent director you get that he has to be aligned to the interests of all stakeholders, being independent from executives. So, having a little amount of shares will not make him not independent!!
Owning shares of a company and being a director at the same time always makes one stop and think if this person can really be considered independent. One of the main purposes of owning shares of a firm is to participate in the profit and increase ones own wealth, thus, it can be very difficult to be judged as independent. The director can certainly behave in a manner, making him act in a way that is perceived as independent, however, there is always this fact that he is owning shares of the company, leading to a perspective of self-interest which then diminishes his independence. Thus, it can be stated that as long as he owns shares, he cannot be considered completely independent as he still has his own interest at heart.
Companies can't allot stock options to independent director. They shouldn't have a material or pecuniary relationship with company or related persons. They can be paid only sitting fees.
Issuing stock to a director does not necessarily have to be a bad thing, as they are not only acting in their own interest, however, through their involvement, it is in their highest interest to bring the firm forward and make sure it is performing well. Of course, he cannot be called independent anymore then.
Yes, the person who has no material interest in the corporation, can not have shares, just only recieves sitting fees. Everything is correct according to definition.
A shareholder's interest is reciving dividends. A company 's primary interest can not be incompatible with paying dividends. Paying dividends is good for a company. It can be an indication of business going well. Thus if we use the director's conflict of interest definition - a situation in wich the interests of the director tends to interfere with the interest of the firm - I don't think there is any problem if Gian Maria Gross Pietro owns shares of Fiat. His interests in Fiat may be equivalent to a simple shareholder. Things may change if the economic relationship with the company increase. In sense if he becomes a relevant shareholder, his interests in company may change his indipendent position.
Even if Montezemolo is not anymore president of one of the firms of the group, he has business interests in Ferrari again. He has to recieve wery hight liquidation prices. Thus Montezemolo can not be independet!
I agree with you, but I want stress the point that Montezemolo owns also a huge numbers of FIAT's shares. Given this motivations is impossible consider Montezemolo as independent.
I agree with both my colleagues. For what concerns Montezemolo's shares in Fiat, it is an italian widely used practice for visible subsidiaries presidents (like Montezemolo with Ferrari) to have them. It consists in a "guarantee" of independence from the holding. A similar example is Ennio Doris, who is president of Bance Mediolanum and ownes a lot of shares within the holding Fininvest.
Luca Cordero Di Montezemolo is not an indipendent director because as we've discussed during the lecture, he is not a manager in Fiat, but he has been a manager in Ferrari. As the theory states, an indipendent director has not to receive compensation from the company or its group.
He is not independent because owns part of the company so there is a conflict of interest between self interest and interest of the firm. In reaching his personal objective He reaches the other shareholders objectives.
Only looking at the picture above and without considering the background of Montezemolo, i would say that he is not in a position of independence considering the huge amount of shares he owns. Because of this, he will probably behave as a owner of the firm rather than an independent director. I definitely think that the board of directors of Fiat could be improved in terms of independence and conflict of interest.
These are the following conditions for considering a director as indipendent: absence or non-relevance, during the previous three years, of any economic or shareholding relationship with the company, its executive directors and executives with strategic responsibilities, its controlling companies or subsidiaries, or any family relationship to the executive directors of those companies. Directors who are partners or directors of major competitors, rating agencies or audit firms engaged by the company in the previous three years, are excluded. Therefore due to Montezemolo large ownership of shares and to to the fact that he has nearly 144 open relationships with other firms (some of them are also related with Fiat) he cannot be considered as indipendent.
Luca Cordero di Montezemolo cannot be considered as an independent director since even if it is not a manager in FIAT, it is a manager in Ferrari (same Group). We must consider this because when we try to identify whether a director is independent or not, we must take care also about the groups of the company we are considering.
Ferrari and Fiat are parts of the same group. Since Luca Cordero di Montezemolo is the president of Ferrari, he cannot be an independent director of Fiat.
Luca Cordero di Montezemolo cannot be considered as independent because he's the President of Ferrari, that belongs to the same Group of Fiat. An independent director indeed is someone that has no link with the firm, the managers of the firm and the Group to which the firm belongs.
I completely agree with all of you. Luca Cordero di Montezemolo is not a independent director of Fiat, because he doesn't meet the requirements for being independent. In fact, as we know, in order to be considered independent he shuouldnt have worked with the company for a period of time, he shouldnt be an existing manager and he should be generally not tied to the company's existing way of doing business.
Exactly, he's not an independent director because he has many relationship with the company, with the majority of the shareholder and the owners. To be considered independent you must have only formal relationship and you will be paid for your presence in the board (sitting fees)
No he is not. He owns fiat shares, he is very close to the Agnelli family and has with that a strong relationship. Moreover he was from 1994 to some days ago the chairman of Ferarri S.p.A and Fiat owns 90% of Ferrari.
Saverio's right. I can add at least two anomalies: he is not Ferrari's Chairman anymore, but he still holds an incredible number of shares of the company (first big problem). Then we have to consider the consequences on personal relations of the decisions taken in these last weeks, where another conflict of interest may arise (second big problem). The latter, according to me, is of incredible importance for investors. At this point we should argue if it WAS an independent director at least before the last events.. well, theory says, as many of you well pointed, he was not.
What about he current situation in Ferrari? Since Sergio Marchionne is now who controls the company, will he bring Fiat or Ferrari's interests up? What if we add the fact that he is paid by the ultimate controlling party (Agnelli's family)?
In my opinion even if Montezemolo was not definible as an indipendent board member of Fiat group, due to his role in Ferrari and the relationship with Agnelli family, he could be considered as a reference in the board with his own (relevant) point of view about Fiat strategies and above all about the role of Ferrari within the whole group. Nowadays with Marchionne as a chairman of Ferrari, the scenario is changed, and it has been a signal to the stakeholders that Ferrari will become more functional to Fiat-Chrysler group strategies (listing in USA stock exchange market and exploitation of Usa market). Moreover the latent friction between the two and the interest of Montezemolo in many other crucial operations as Alitalia make possible to hypotize that his role in Fiat board can change acting a more indipendent role, and the big ownership of shares (i.e. a big interest to protect) can support this hypotesis.
Montezemolo can't be considered as an independent director. In fact he does not respect all the standards for independence. More specifically an independent director should not have material business relations with the company or its group. In our case montezemolo is a manager of Ferrari ( until September 2014 he was its chairman ) a company controlled by Fiat.
Luca Cordero di Montezemolo isn't an independent director, because he does not follow all the requirements for independence. He isn't the chairman of Ferrari but holds a large number of shares of it so this isn't right.
di Montezemolo isn't an independent director, because he owns a huge numbers of FIAT's shares. Given this motivations is impossible consider Montezemolo as independent.
Of course he cannot be considered indipendent for two reasons: firstly he ows shares in the company and secondly, until some weeks ago, he was the chairman of Ferrari, a company controlled by Fiat.
Luca Cordero di Montezemolo cannot be considered indipendent because he is (actually was) the CEO of Ferrari, a company in the Fiat group. While, in my opinion, the fact that he owns shares of Fiat cannot be considered a reason to not consider him as indipendent. Actually, it is not uncommon for indipendent directors to have shares of the company, on the contrary, this could be considered as a positive attribute for an indipendent director.
Luca Cordero di Montezemolo cannot be appointed and therefore considered as an independent director because of the following reason: Related Party Transactions (RPT). This Board Member would have all the interest in diverting resources from FIAT to FERRARI. However now the risk is not more existing because Marchione "kindly" asked Montezemolo to step down.
I think that Montezemolo should be cosidered not independent in the FIAT group because he was the Ferrari Spa's president and so he couldn't be directly active in FIAT's decision but indirectly throght the control of Ferrari.
Montezemolo can not be considered independent because he own shares in the company, and because, until the 13th of october, he has been the chairman of Ferrari, that is part of the Fiat Group
Montezemolo is not independent because of his relations with the Agnelli family and because of his position in Ferrari. If he were an independent director he would embody the type II agency problem. Wo believes that he is independent also believes that donkeys can fly.
Considering his personal business interest and him holding Fiat shares, he has a vital interest in the well-doing of the firm in order to profit himself. This makes him dependent and he cannot be see as independent.
He is not independent because he owns part of the company and also because to be an independent shareholder you have to be paid by minority shareholders and this is not the case
Because he was, at the same time, members of the board of directors of Fiat spa and Chairman of Ferrari spa, controlled by Fiat. But it is not enough. He ie not independent especially beacause he owns a lot of shares of Fiat spa.
Also in this case we can use the conflict of interest theory to answer. A corporation 's advantage and interest is the unlimited life. While the major shareholder may want to enjoy it 's position in the short run, taking care more to it's interests rather than the firm's ones. If I were appinted as a director by the major shareholder I could not be considered independet because there is a potential conflict of interest.
No I'm not considered an independent director because the major shareholder appointed me, so I will have conflict of interests even if I think I'm capable of doing the job. My interests will not be aligned with the interests of the firm but with this shareholders interest.
I agree with both of you. An Independent director is a member of a board of directors who does not have a material or pecuniary relationship with company or related persons, except sitting fees. Therefore, in this case, when i am appointed by the major shareholder, maybe because I have or will have the relationship with him. Thus I am not considered as an independent director.
In this case even if I can be formally independent I'm not truly independent because having the major shareholder appointed me I could be indebted to pursue his own interest in order to maintain my seat.
Actually, I could be an indipendent director as long as I respect several requirements: first of all, I should be appointed by the shared decision of the shareholder meeting and be an expert with adequate professional background, with the highest ethical standards, but most important, I should be an outside director with no linkage with the family of a member of the management, and moreover, I cannot be a member of the management of the company, as well as an employee or someone that has material business relations with the group.
The major shareholder could have chosen me for my background and my capabilities and skills. So, if some qualities that we studied during the lecture are satisfied, I could be considered an independent director.
I think I could be an independent director because: I don't have a material or pecuniary relationship with this company or related persons, and I don't own shares in the company.
Since the major shareholder appointed me, I cannot be considered an independent director. This is because my behaviour would not be a free-standing one, this is obviously a situation in which we have conflict of interest.
I would be considered as indipendent as I have no economic nor shareholding relationships with the company, its executive director, its subsidiaries, main competitors, rating and audit agencies .
I will be considered as an independent director, if I do not have interests that are aligned with the ones of the firm's organization. The fact that the major shareholder has appointed me does not constitute the basis for a definite opportunistic behaviour.
If I were given chance to sit in the Board as a independent director I will not be in conflict of interest for the following reasons: a) I do not have any parental link with the one of the family members nor with one of the member belonging to the top management b) Being a student, I have never had the chance to be employed somewhere before, and therefore as matter of fact any kind of previous working relation with the group did never exist c) I do not have any kind of business relation with group for which I am supposed to work for
To conclude, I am a perfect estranger with the respect of the members of the group. However, though not being in conflict of interests, I lack the professional experience required for that position. If someone were appointed upon the occurrence of this scenario he would not be independent because he would be easily manipulated by others
I can be considered as an independent director if I respect all the six positive attributes and if I am not in a situation of conflict of interest that can lead me to have an interest not aligned with the one of the firm.
My family and I are not a member of the management of the company. I have never been employed in the company or in the group of the company or by an external auditor of the companies in the group. I don’t obtain any compensation other than directionship fees. I don’t exceed the maximum tenure as a board member. I don’t have material business relation with the company and the group. I think that the major shareholder has appointed me in the board of Fiat, since he recognizes in me some desirable qualities for an independent directors. For all these reasons I can say that I will be considered an independent director!
Yes, in such case I would be considered independent, since my interests are not aligned to those of the company, I have not worked with the company for a period of time, I am not an existing manager and I am generally not tied to the company's existing way of doing business.
I wouldn't be independent because my decision making could be biased by my loyalty towards the major shareholder, making my decisions not always aligned with the ones that would be in the interest of the firm because of the conflict of interests
it' depends by the relationship (monetary and not) I have with the company and with its related people, as exception for the sitting fees i gain. As an independent director I could be appointed there by the major shareholders, be remunerated for my activity and presence in the Board and remain independent. I won't be independent, if I'm a relative or I have extra professional relationship with the shareholders or with the company (ex manager for example). this means I could have other purposes can affect my behavior.
Well, sad to say it depends. Am I well accepted by other shareholders? Has the Major Sareholder appointed me for merit (for the sake of the company) or personal relations? Since I do not know him at all (Alberto's point), my gratitude should not be 'a priori' considered an impediment to my independence. Obviously, any humus of relationship with the ultimate controlling party makes me potentially a part of it when I accept the charge.
I think that in any cases there is a potential dependence with the ultimate controlling party because even if now I'm acting as an independet director for certain decisions I could make the interest of the shareholder that appointed me (yes man) in other cases, it's a kind of dynamic situation.
No I will not act as an independent director because I have been appointed by the major shareholder, so even if I think my work will be transparent, it wont and I will have conflict of interests.
I think yes because some blow reasons: 1. I don't own shares in the company. 2. I don't have a material or pecuniary relationship with this company or related persons
I don't think that it would be easy for me to be truly independent. Probably, since I don't own shares of the company and I'm not an executive I could be considered as independent but the problem is that I wouldn't feel free to evaluate independently the performance of Sergio Marchionne.
No I'm not considered an independent director because i will have conflict of interests , My interests will not be aligned with the interests of the firm but with this shareholders interest.
Alberto Bonaventura your answer was great! I personally think that I would be an indipendent shareholder only if I do not have any significant economic, personal or other interests that may conflict with the interests of the company or shareholders. But actually even if I will meet all these criteria of "indipendence", I might be incapable of exercise indipendent judgement.
Unfortunately, I would not consider myself as indipendent. In fact, even if I can easily meet all the standards for indipendence, I would probably prove my self incapable of exercise an objective judegement. This is due to the fact that I lack the necessary professional background,
It depends: I cannot be considered independent, since the major shareholder appointed me. But at the same time, I don't have shares and pecuniary relationships with the company. Thus, in this case, I can be considered as independent
To be really independent a director can not be appointed directly by the major shareholder, because will be very difficult for him criticize his employer.
I should be independent if I respect some positive attributes and I have no conflict of interests that can potentially create problems to me and to the company
As it is the major shareholder, who is appointing me to be the director, I cannot be considered independent, as there is an existing relationship between me, the director and the shareholder of the firm. There will always be an interdependence between the appointment of the job and maybe some favours paid to the shareholder - thus making me dependent on the goodwill.
it is controversial because i will not be considered dependent because i have nor material neither pecuniary relationships with the controlling party but the fact that is properly the major shareholder to appoint me could be considered a reason to justify a sort of dependency
If major shareholders appoints me it means that he knows me and that i am a way to protect his interest. A good example could be ENI spa, where the top management is appointed by the politicians, and, in many cases these members are very close to politicians view.
John Elkann is not only Chairman of Fiat Board of Directors, but he is also president of the Holding "Exor S.p.a". and of the "s.a.p.a. Giovanni Agnelli e C". Is it normal or strange to see it? How much power does he have within the Board having this status?
John Elkann, thanks to his 'Exor S.p.a', finance both Fiat and Juventus, two organizations within the same group. I think that this is a damage for the entire group because of the different interests, and because he may encourage only these two firms and neglet the others.
I'm completely agree with Silvia. Of course in this case we can have some conflicts of interest. He, being in the board of directors, has a lot of power to control the company by pursuing their own interests.
I don't think we can consider Exor as a Chinese Box because it is true its revenues come from only "Partecipazioni" but Exor receives revenues directly from different companies without the step by step process among companies that own each others that characterizes the Chinese box model.
I am totally agree with Silvia Tabuani. It is possible because two organizations within the same group and this is a damage for the entire group because of the different interests, and because he may encourage only these two firms and neglect the others.
i agree with Silvia partially , in fact it seems to be right that being a owner of 3 organization in the same time makes conflict of interest between them , but actually it depends on the way of managing and the separate interest of each one , and the main sector for each one , for example : Fiat is a vessel's producer but Juventus is a sport club and la stampa is a newspaper , so in my opinion it's not necessary to create a conflict of interest if u manage more than one organization
I think that when you reach this level is quite normal to be the owner of more than one company. The fact that one own two companies that operates in the same sector it's not necessary a bad thing: 1) increase competition--> companies will try to work harder to reach best results. 2) cover all consumers need--> it can be very expensive to differentiate products in a way to cover all possible needs and wants of costumers.
I think this is very common. He finances both Fiat and Juventus that are part of the same group, and as a result he will have considerable power within the board.
Dear Lorenzo, do you remember about who are you speaking about? John Elkann is the man who has taken the biggest part of the inherits of Giovanni Agnelli ( the lawyer) and he is one of the most influential people in the industrial world. Especially in Italy is exremly normal to see this situation. According to me behind the choice to dismiss Montezemolo there is him, through his "person of trust" Marchionne.
Sorry guys. I have a non-fiat-related question for you. I've heard about the figure of the "lead independent director". Can you please tell me which is his role and what are his responsibilities? Thank u very much
As far as I know a Lead independent director is someone who works collaborately with the Chairman and the CEO of the company. He can call together meetings with independent directors and that also chairs the meetings.
I think it can vary by the country and their national legislation. In addition, in my opinion, the position description of a lead independent director also varies by company.
In my view, the lead director serves as an independent chief among all board members and thereby helps ensure board relations run smoothly. Lead directors drive high-performance boards. Many lead directors improve board performance by facilitating board discussions, by helping directors reach consensus, and by keeping board matters on track.
I agree too with ThuyLe, the Lead Independent Director have to be an Independent Director who acts as a leader of the board. But the most important task in my opinion is to ensure transparency within the board.
The LID sholud (it is not compulsory, although highly recommended) be nominated whenever two events occur: 1) The CEO sits in the vest of Chairman in the BoD 2) The owner (major shareholder) sits in the BoD in the vest of Chairman
What is the rationale of the conduct rule? It is evident that if the major shareholder holds the direction of the BoD he might be tempted to not properly and timely inform the other directors on the main issues faced by the company so as to extract private benefit. Therefore the appointment of a LID is aimed at monitoring the behavior of the Chairman (Agency Cost) ensuring that the information will be properly and timely released.
I agree with all of you guys. The role of the lead independent director is to provide leadership to the independent directors, liaise with CEO on behalf of the independent directors and advise the board on matters where there may be cases of conflict of interest.
Another important role of the LID is to call sessions composed only by independent directors and to preside over them. In this independent session the independent directors can exchange ideas each other far from the ifluence of the inside directors.
Totally agree with Alberto. It is foundamental the respect of this rules to avoid a sutiation of conflict of interest and especially a situation in which all the power is in the hand of the same person.
I agree with Erika, and in addition, I would say that according to the Italian corporate governance code, there are mainly 2 circumstances, in which the Board has to designate an indipendent director as 'LEAD' : 1) when the Chairman is the CEO of the company; 2) when the chairman's office is held by the person controlling the issuer.
I agree with both of you. The role of "lead independent director" is necessary in the case of CEO duality when the ceo is also the chairman of the board
It is necessary in this situation because when too much power is concentrated in the hands of one person more control is needed. If we want to make a connection of this situation with scholars' analysis, we can observe that the perception towards CEO duality is still close to the agency theory, in which concentrating too much power in the hands of one person would be detrimental to the firm without the necessary control from the BoD. In a stewardship theory perspective CEO duality could be beneficial to the firm, in that according to this stream of thoughts the CEO, who is a good steward to his firm, would be able to work more effectively by being alone. However this second theory, even though fascinating, is not yet fully applicable to reality, thus a lead independent director is absolutely necessary in a situation of CEO duality.
John Elkann (Chairman and Chief Executive Officer of EXOR S.p.A, that controls Juventus football club s.p.a.) is a member of the Board of Directors of News Corp., the group that controls also Sky Italia; can we say that there is a conflict of interests?
No, I don't think so! There couldn't be conflict of interest! The most probable effect, on my point of view is a much more positive TV judgement, and nothing else!
In my view, there might be a sort of conflict of interest. For example, what about when Sky has to decide how much to pay juventus for the TV rights or for a sponsor on their shirts ? Will he pursue the interests of Sky or those of Juventus ?
I agree with Federico; if for example Exor had greater Cash flow rights from Juventus F.C. than from Sky networks, it would be likely to overpay the annual television rights to the football team in order to get more cash flow from Juventus at damage of Sky's shareholders.
I think there is a great conflict of interest. You can see it by the judgement that are given at the end of the match. Moreover, you can see how tv rights are splitted, that is, in an unfair way. Another curious aspect is related to Infront, that is in charge of the shots of the match: Juventus has their own directors for the match, and sometimes the shorts doesn't tell all the truth
yes, it can be possibile. We should consider that there are a lot of transactions between Sky corporation in prchiasing broadcast rights from football clubs!!!
In Italy is always like that; otherwise if the major shareholder is not chairman is the ultimate controlling party of the holding that control the company.
Please, ask questions to your colleagues using the board of directors of Fiat and the theory discussed during the lesson
ReplyDeleteWhich is the difference between Non Exectuive Directors (NED) and Independent ones?
DeleteBy non executive directors we address those members of the BoD who aren't part of the executive management team, and aren't affiliated to the company, nor are employees. The main feature that distinguishes them from independent directors, is that NEDs are allowed to hold shares, while independent directors aren't.
DeleteI think that this is not totally correct. Non executives directors are directors who don't have executive functions. They are not managers of the firm, but they are linked or someway affiliated to the firm (notice that Andrea Agnelli is a non executive director!). Instead independent directors are the ones not affiliated to the company, neither actual nor ex employees.
DeleteIndependent directors are a particular distinction of non executive directors (or outside directors),together with affiliated directors,but differently from this category, the independent directors have to respect some criteria of independence from the organization (not to be an employee or a manager and so on..).
DeleteA non-executive director is a member of the board of directors of a company who does not form part of the executive management team. They are not employees of the company. Independent director, sometimes known as a outside director, is a member of a board of directors, does not own shares in the company.
DeleteOutside director or non- executive d. is a category of board members, we can distinguish :Independent director that is a board member without linkages with the firm or its member or relations with the external auditor of the company. and affiliated ex. director with linkages with the company.
DeleteIndependent director is a director member of the Board of directors who doesn't have a material relationship with company or with related people. But usually they are too influenced by the ceo and instead they should be independet. The main different with NED is that they should not own shares of company for which they are independent directors.
DeleteNon-executive directors are members of the board of directors not affiliated with the company. They are outside directors not involved with the day-to-day activities of the company, with the role of monitoring executive activities and developing company's strategy. They can hold company's shares. Instead, an independent director has to respect the famous independece criteria and moreover cannot hold shares of the company
DeleteA non ecxecutive director is a member of the Board of a company who is not at the same time a manager of that firm. A non executive director is independent when he doesn't own shares of the firm and he has not any kind of relationship or link with the firm. For example an employee, a consultant of the firm or a member of the controlling family cannot be considered as independent.
DeleteIn my opinion, A non-executive director (or outside director) is a member of the board of directors of a company or organisation who does not form part of the executive management team. A non-executive director (NED) typically does not engage in the day-to-day management of the organization, but is involved in policy making and planning exercises.
DeleteIn addition, non-executive directors' responsibilities include the monitoring of the executive directors, and to act in the interest of any stakeholders. Also called external director, independent director and outside director.
While an Independent director (also sometimes known as a outside director) is a director (member) of a board of directors who does not have a material or pecuniary relationship with company or related persons, except sitting fees. Independent Directors do not own shares in the company.
Hence, the main difference between Non Exectuive Directors (NED) and Independent Directors is NED do own shares but Independent Directors do not own shares in the company
A non-executive director can be an inside director by owning shares of the company, while a director has to be considered independent when there is the presence of positive criteria and/or absence of negative criteria, as we saw in class. An independent director must be for sure an outside director, he/she cannot own shares of the company and his/her presence in the Board is important to protect the interests of minority shareholders and/or the other stakeholders. A family member of the ultimate controlling party could be a non-executive member of the Board, whilst he/she could never be an independent director.
DeleteNon executives directors are directors who don't have executive functions. They are not managers of the firm, but they are linked to the firm. Instead independent directors are the ones not affiliated to the company, neither actual nor ex employees.
DeleteNon-executive directors are members who are not owners and/or managers inside the company, while indipendent directors are members who do not have a material or pecuniary relationship with company or related persons, except sitting fees.
DeleteNon executive directors are the members of the board who are not members the executive team, and they are not affiliated to the company; they can hold shares of the company, while independent director can not.
Deletenon executive directors are members of the board and are not managers at the same time; they can be also independent when he has not any relationship or link with the firm; (in theory they should not own shares but practically it can be possible that they own them)
DeleteThey are member of boards but they haven't got executive right. If NED has not any connections with company and in this case they can be independent
DeleteThe main differences are that, independent directors are the ones not affiliated to the company, neither actual nor former employees. (they have to respect various requirements)
DeleteInstead, it is defined non-executive director a member of the board of directors of a company or organisation who does not form part of the executive management team, and so who does not contribute to the elaboration of the corporate strategy.
Non-exective directors (or outside directos) are those who are member of the board of directors, but does not form part of the executive managment team. Non-executive directors are often considered the same as independent directors, but the main difference between them is that non-executive directors can have company;s share, while independent - no.
DeleteIn my opinion, A non-executive director is a member of the board of directors of a company or organisation who is not manager. A non-executive director can be called external director, independent director and outside director.
DeleteWhile an Independent director is a director also member of a board of directors who does not have a material or pecuniary relationship with company or related persons, except sitting fees.
In my opinion non executive directors are members of the board and are not managers at the same time, however they can be also independent when he has not any relationship or link with the firm.
DeleteIndipendent directors are members with no relationships with the firm ( material or pecuniary) which are remunerated on the base of their presence during the board meeting, while non-executive directors are members of the board who shouldn't own any shares of the company and don't take any decision in day by day activity.
DeleteGuys i have one doubt, do you think it's normal that also an independent director (Gian Maria Gros-Pietro) holds shares of the company? Can he be considered really independent?
ReplyDeleteI think that it's not a bad or strange thing.
DeleteAn independent person could be more neutral and impartial and take decisions in a more objectively way.
So, according to me it is a good situation for every firm to have an independent director.
Giacomo, I think that Gian Maria Gros-Pietro is allowed to own shares in the company because he is a NON-executive indipendent director, therefore he does not form part of the executive management team. The legislation makes a difference between executive and non.executive indipendent directors on the grounds that the first are members of the board who also serve or previously served as executive managers of the company and are not generally allowed to own shares . what do you think , instead, of possible influences due to Gros Pietro's primary role in Intesa Sanpaolo SPA?
DeleteThe primary interest of an independent director must be aimed at preserving the interest of shareholders. So if I were in the shoes of Mr Gros-Pietro I would own some stocks to align my interest to that of shareholders. Moral of the story: I do not think there exists a conflict of interests in this case.
DeleteI agree with you, I don't think there's a conflict of interest because this situation allows to more alignment between ownership and control, while a conflict of int. occurs when the interest of the director tends to interfere with the interest of the firm. .In pursuing its own interest Gian Maria Gros-Pietro pursues the interest of the other shareholders and of the company.
DeleteI understand your point guys, but it seems to me that in these answers you're thinkin just through the lenses of the shareholders theory of the firm. The only objective of the firm is to serve it's shareholder's interests and according to the agency theory some incentives are needed in order to align owners and managers' interests.
DeleteBut what happens the organic theory, according to wich the company has to take in account all its stakeholder's interests creating sustainable profit in the shor and in the long run? Let's make an example:
The management is going to make a financial operation that would bring a big amount of money for shareholders in the shor term, while destroying value for other stakeholders in the long run. Being Gian Maria Gros Pietro also a shareholder, is there a conflict of interest? which interests would he serve?
I think that it's not a problem because, as we've seen in theory, there is a distinction between the existence of a conflict of interest and taking advantage from that conflict..we've seen the "weighing scale proposing different situations, including the one in which the creation of the value for the firm can be more important than a particular and personal interest. So, why it could not be the case of Gian Maria Gros Pietro to be in this situation?
DeleteFederica S. has a point. Giacomo, you also have one! But BoD is appointed through weighted votation among relevant shareholders, am I right? So even if it sounds strange off course he may peacefully be considered an independent investor that owns massive shares of the group (that translates in a massive contribution to its business) and excercises his RIGHT to seat at the board representing his own, independent, interest along with the other shareholders who supported is appointment (if any).
DeleteI agree with Alberto Bonaventura because the primary interest of an independent director must be aimed at preserving the interest of shareholders.
DeleteGiacomo, I think that an independent director should not own shares of the company to be considered truly independent. He/she should not act in his/her own interest but in the interest of all the stakeholders (at least as much as possible) and of the firm itself, according to the "Economia Aziendale" theory. Therefore, the risk is that, owning shares, he would have also a personal interest in dividends and capital gains, opening the door to a possible conflict of interest. Thus, in my opinion, I don't think that giving shares to independent directors would be the best solution.
DeleteI don't think it is a problem for indipendent directors to have shares of the firm. On the contrary, if the indipendent directors own shares of the company they could be more involved in their activity and their interests could be more alligned with those of the shareholders they represent
DeleteIn accordance with the Agency Theory, holing a bunch of stocks can reinforce its interests in protecting shareholder's interests.
DeleteActually I think it is not so strange! I agree with Federico, independent directors have to respect independence criteria but they can have shares and so be better aligned with the interests of shareholders.
DeleteI think it can be considered quite normal, because in this way they could be more aligned with the interests of the company
DeleteI think that it is not strange that also independent directors own shares in the firm, especially if one considers that it is quite common in the practice to adopt for this category long term incentives in the form of "performance share plans".
DeleteOn my view is important to understand if the firm follow the one tier system or the two tier system because in a one tier system is pivotal that the independent directors are truly independent. The independent directors in fact should control the executive directors.
DeleteIn theory they should not own shares, but in practice they own them and in this way they are more involvded in the activities of the firm and in the interests of the shareholders
DeleteIt depends on situation, but in my opinion this case is so strange, because of opportunistic interest..
DeleteI don't think we can talk about conflict of interests in this situation. Because if you think to the role of independent director you get that he has to be aligned to the interests of all stakeholders, being independent from executives. So, having a little amount of shares will not make him not independent!!
DeleteOwning shares of a company and being a director at the same time always makes one stop and think if this person can really be considered independent. One of the main purposes of owning shares of a firm is to participate in the profit and increase ones own wealth, thus, it can be very difficult to be judged as independent. The director can certainly behave in a manner, making him act in a way that is perceived as independent, however, there is always this fact that he is owning shares of the company, leading to a perspective of self-interest which then diminishes his independence.
DeleteThus, it can be stated that as long as he owns shares, he cannot be considered completely independent as he still has his own interest at heart.
The focal interest of the independent shareholders is to preserve other shareholders interest
DeleteCompanies can't allot stock options to independent director. They shouldn't have a material or pecuniary relationship with company or related persons. They can be paid only sitting fees.
ReplyDeleteExactly, otherwise can be detrimental for firm...
DeleteIssuing stock to a director does not necessarily have to be a bad thing, as they are not only acting in their own interest, however, through their involvement, it is in their highest interest to bring the firm forward and make sure it is performing well. Of course, he cannot be called independent anymore then.
DeleteExactly
DeleteIt should be like that, but in reality, a lot of times they are paid with stock options or shares of the company.
DeleteYes, the person who has no material interest in the corporation, can not have shares, just only recieves sitting fees. Everything is correct according to definition.
DeleteA shareholder's interest is reciving dividends. A company 's primary interest can not be incompatible with paying dividends. Paying dividends is good for a company. It can be an indication of business going well. Thus if we use the director's conflict of interest definition - a situation in wich the interests of the director tends to interfere with the interest of the firm - I don't think there is any problem if Gian Maria Gross Pietro owns shares of Fiat. His interests in Fiat may be equivalent to a simple shareholder. Things may change if the economic relationship with the company increase. In sense if he becomes a relevant shareholder, his interests in company may change his indipendent position.
ReplyDeleteAnd also is to increase profit and price of their shares in stock market...
DeleteLuca Cordero di Montezemolo is not independent. Why?
ReplyDeleteEven if Montezemolo is not anymore president of one of the firms of the group, he has business interests in Ferrari again. He has to recieve wery hight liquidation prices. Thus Montezemolo can not be independet!
DeleteI agree with you, but I want stress the point that Montezemolo owns also a huge numbers of FIAT's shares. Given this motivations is impossible consider Montezemolo as independent.
DeleteI agree with both my colleagues. For what concerns Montezemolo's shares in Fiat, it is an italian widely used practice for visible subsidiaries presidents (like Montezemolo with Ferrari) to have them. It consists in a "guarantee" of independence from the holding.
DeleteA similar example is Ennio Doris, who is president of Bance Mediolanum and ownes a lot of shares within the holding Fininvest.
Luca Cordero Di Montezemolo is not an indipendent director because as we've discussed during the lecture, he is not a manager in Fiat, but he has been a manager in Ferrari. As the theory states, an indipendent director has not to receive compensation from the company or its group.
DeleteHe is not independent because owns part of the company so there is a conflict of interest between self interest and interest of the firm. In reaching his personal objective He reaches the other shareholders objectives.
DeleteMontezemolo is not independent because he owns some shares of Fiat and, moreover, he was the President of Ferrari, which is in the same group of Fiat.
DeleteOnly looking at the picture above and without considering the background of Montezemolo, i would say that he is not in a position of independence considering the huge amount of shares he owns. Because of this, he will probably behave as a owner of the firm rather than an independent director. I definitely think that the board of directors of Fiat could be improved in terms of independence and conflict of interest.
DeleteThese are the following conditions for considering a director as indipendent:
Deleteabsence or non-relevance, during the previous three years, of any economic or shareholding relationship with the company, its executive directors and executives with strategic responsibilities, its controlling companies or subsidiaries, or any family relationship to the executive directors of those companies. Directors who are partners or directors of major competitors, rating agencies or audit firms engaged by the company in the previous three years, are excluded. Therefore due to Montezemolo large ownership of shares and to to the fact that he has nearly 144 open relationships with other firms (some of them are also related with Fiat) he cannot be considered as indipendent.
Luca Cordero di Montezemolo cannot be considered as an independent director since even if it is not a manager in FIAT, it is a manager in Ferrari (same Group). We must consider this because when we try to identify whether a director is independent or not, we must take care also about the groups of the company we are considering.
DeleteFerrari and Fiat are parts of the same group. Since Luca Cordero di Montezemolo is the president of Ferrari, he cannot be an independent director of Fiat.
DeleteLuca Cordero di Montezemolo cannot be considered as independent because he's the President of Ferrari, that belongs to the same Group of Fiat. An independent director indeed is someone that has no link with the firm, the managers of the firm and the Group to which the firm belongs.
DeleteLuca Cordero di Montezemolo is not the independent director, because he owns shares of the company
DeleteI completely agree with all of you. Luca Cordero di Montezemolo is not a independent director of Fiat, because he doesn't meet the requirements for being independent. In fact, as we know, in order to be considered independent he shuouldnt have worked with the company for a period of time, he shouldnt be an existing manager and he should be generally not tied to the company's existing way of doing business.
DeleteExactly, he's not an independent director because he has many relationship with the company, with the majority of the shareholder and the owners. To be considered independent you must have only formal relationship and you will be paid for your presence in the board (sitting fees)
DeleteNo he is not. He owns fiat shares, he is very close to the Agnelli family and has with that a strong relationship. Moreover he was from 1994 to some days ago the chairman of Ferarri S.p.A and Fiat owns 90% of Ferrari.
DeleteSaverio's right. I can add at least two anomalies: he is not Ferrari's Chairman anymore, but he still holds an incredible number of shares of the company (first big problem). Then we have to consider the consequences on personal relations of the decisions taken in these last weeks, where another conflict of interest may arise (second big problem). The latter, according to me, is of incredible importance for investors.
DeleteAt this point we should argue if it WAS an independent director at least before the last events.. well, theory says, as many of you well pointed, he was not.
What about he current situation in Ferrari? Since Sergio Marchionne is now who controls the company, will he bring Fiat or Ferrari's interests up? What if we add the fact that he is paid by the ultimate controlling party (Agnelli's family)?
DeleteIn my opinion even if Montezemolo was not definible as an indipendent board member of Fiat group, due to his role in Ferrari and the relationship with Agnelli family, he could be considered as a reference in the board with his own (relevant) point of view about Fiat strategies and above all about the role of Ferrari within the whole group. Nowadays with Marchionne as a chairman of Ferrari, the scenario is changed, and it has been a signal to the stakeholders that Ferrari will become more functional to Fiat-Chrysler group strategies (listing in USA stock exchange market and exploitation of Usa market). Moreover the latent friction between the two and the interest of Montezemolo in many other crucial operations as Alitalia make possible to hypotize that his role in Fiat board can change acting a more indipendent role, and the big ownership of shares (i.e. a big interest to protect) can support this hypotesis.
DeleteMontezemolo can't be considered as an independent director. In fact he does not respect all the standards for independence. More specifically an independent director should not have material business relations with the company or its group. In our case montezemolo is a manager of Ferrari ( until September 2014 he was its chairman ) a company controlled by Fiat.
DeleteLuca Cordero di Montezemolo isn't an independent director, because he does not follow all the requirements for independence. He isn't the chairman of Ferrari but holds a large number of shares of it so this isn't right.
DeleteIn my view, Montezemolo is not the independent director, because Luca Cordero di Montezemolo owns shares of the company
Deletedi Montezemolo isn't an independent director, because he owns a huge numbers of FIAT's shares. Given this motivations is impossible consider Montezemolo as independent.
DeleteOf course he cannot be considered indipendent for two reasons: firstly he ows shares in the company and secondly, until some weeks ago, he was the chairman of Ferrari, a company controlled by Fiat.
DeleteLuca Cordero di Montezemolo cannot be considered indipendent because he is (actually was) the CEO of Ferrari, a company in the Fiat group. While, in my opinion, the fact that he owns shares of Fiat cannot be considered a reason to not consider him as indipendent. Actually, it is not uncommon for indipendent directors to have shares of the company, on the contrary, this could be considered as a positive attribute for an indipendent director.
DeleteLuca Cordero di Montezemolo cannot be appointed and therefore considered as an independent director because of the following reason: Related Party Transactions (RPT).
DeleteThis Board Member would have all the interest in diverting resources from FIAT to FERRARI. However now the risk is not more existing because Marchione "kindly" asked Montezemolo to step down.
I think that Montezemolo should be cosidered not independent in the FIAT group because he was the Ferrari Spa's president and so he couldn't be directly active in FIAT's decision but indirectly throght the control of Ferrari.
DeleteMontezemolo can not be considered independent because he own shares in the company, and because, until the 13th of october, he has been the chairman of Ferrari, that is part of the Fiat Group
DeleteMontezemolo is not independent because of his relations with the Agnelli family and because of his position in Ferrari. If he were an independent director he would embody the type II agency problem. Wo believes that he is independent also believes that donkeys can fly.
DeleteMontezemolo for sure is not independent because he doesn't respect the indipendence criteria and then until one month ago he was a Ferrari managers
Deletean independent director don't get compensation from the company.
DeleteConsidering his personal business interest and him holding Fiat shares, he has a vital interest in the well-doing of the firm in order to profit himself. This makes him dependent and he cannot be see as independent.
DeleteHe is not independent because owns part of the company
DeleteHe is not independent because he owns part of the company and also because to be an independent shareholder you have to be paid by minority shareholders and this is not the case
DeleteBecause he was, at the same time, members of the board of directors of Fiat spa and Chairman of Ferrari spa, controlled by Fiat. But it is not enough. He ie not independent especially beacause he owns a lot of shares of Fiat spa.
DeleteSuppose that the major shareholder appoints you in the board of Fiat. Are you considered as independent director? Why?
ReplyDeleteAlso in this case we can use the conflict of interest theory to answer. A corporation 's advantage and interest is the unlimited life. While the major shareholder may want to enjoy it 's position in the short run, taking care more to it's interests rather than the firm's ones. If I were appinted as a director by the major shareholder I could not be considered independet because there is a potential conflict of interest.
DeleteNo I'm not considered an independent director because the major shareholder appointed me, so I will have conflict of interests even if I think I'm capable of doing the job. My interests will not be aligned with the interests of the firm but with this shareholders interest.
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DeleteI agree with both of you.
DeleteAn Independent director is a member of a board of directors who does not have a material or pecuniary relationship with company or related persons, except sitting fees.
Therefore, in this case, when i am appointed by the major shareholder, maybe because I have or will have the relationship with him. Thus I am not considered as an independent director.
In this case even if I can be formally independent I'm not truly independent because having the major shareholder appointed me I could be indebted to pursue his own interest in order to maintain my seat.
DeleteActually, I could be an indipendent director as long as I respect several requirements: first of all, I should be appointed by the shared decision of the shareholder meeting and be an expert with adequate professional background, with the highest ethical standards, but most important, I should be an outside director with no linkage with the family of a member of the management, and moreover, I cannot be a member of the management of the company, as well as an employee or someone that has material business relations with the group.
DeleteThe major shareholder could have chosen me for my background and my capabilities and skills. So, if some qualities that we studied during the lecture are satisfied, I could be considered an independent director.
DeleteI think I could be an independent director because: I don't have a material or pecuniary relationship with this company or related persons, and I don't own shares in the company.
DeleteSince the major shareholder appointed me, I cannot be considered an independent director. This is because my behaviour would not be a free-standing one, this is obviously a situation in which we have conflict of interest.
DeleteI would be considered as indipendent as I have no economic nor shareholding relationships with the company, its executive director, its subsidiaries, main competitors, rating and audit agencies .
DeleteI will be considered as an independent director, if I do not have interests that are aligned with the ones of the firm's organization. The fact that the major shareholder has appointed me does not constitute the basis for a definite opportunistic behaviour.
DeleteIf I were given chance to sit in the Board as a independent director I will not be in conflict of interest for the following reasons:
Deletea) I do not have any parental link with the one of the family members nor with one of the member belonging to the top management
b) Being a student, I have never had the chance to be employed somewhere before, and therefore as matter of fact any kind of previous working relation with the group did never exist
c) I do not have any kind of business relation with group for which I am supposed to work for
To conclude, I am a perfect estranger with the respect of the members of the group. However, though not being in conflict of interests, I lack the professional experience required for that position. If someone were appointed upon the occurrence of this scenario he would not be independent because he would be easily manipulated by others
I can be considered as an independent director if I respect all the six positive attributes and if I am not in a situation of conflict of interest that can lead me to have an interest not aligned with the one of the firm.
DeleteMy family and I are not a member of the management of the company. I have never been employed in the company or in the group of the company or by an external auditor of the companies in the group. I don’t obtain any compensation other than directionship fees. I don’t exceed the maximum tenure as a board member. I don’t have material business relation with the company and the group.
DeleteI think that the major shareholder has appointed me in the board of Fiat, since he recognizes in me some desirable qualities for an independent directors.
For all these reasons I can say that I will be considered an independent director!
If I respect all the requirements that an independent director should have to be considered as "independent" (already mentioned), why not?
DeleteYes, in such case I would be considered independent, since my interests are not aligned to those of the company, I have not worked with the company for a period of time, I am not an existing manager and I am generally not tied to the company's existing way of doing business.
DeleteI wouldn't be independent because my decision making could be biased by my loyalty towards the major shareholder, making my decisions not always aligned with the ones that would be in the interest of the firm because of the conflict of interests
Deleteit' depends by the relationship (monetary and not) I have with the company and with its related people, as exception for the sitting fees i gain. As an independent director I could be appointed there by the major shareholders, be remunerated for my activity and presence in the Board and remain independent. I won't be independent, if I'm a relative or I have extra professional relationship with the shareholders or with the company (ex manager for example). this means I could have other purposes can affect my behavior.
DeleteWell, sad to say it depends. Am I well accepted by other shareholders? Has the Major Sareholder appointed me for merit (for the sake of the company) or personal relations?
DeleteSince I do not know him at all (Alberto's point), my gratitude should not be 'a priori' considered an impediment to my independence. Obviously, any humus of relationship with the ultimate controlling party makes me potentially a part of it when I accept the charge.
I think that in any cases there is a potential dependence with the ultimate controlling party because even if now I'm acting as an independet director for certain decisions I could make the interest of the shareholder that appointed me (yes man) in other cases, it's a kind of dynamic situation.
DeleteNo I will not act as an independent director because I have been appointed by the major shareholder, so even if I think my work will be transparent, it wont and I will have conflict of interests.
DeleteI think yes because some blow reasons:
Delete1. I don't own shares in the company.
2. I don't have a material or pecuniary relationship with this company or related persons
I don't think that it would be easy for me to be truly independent. Probably, since I don't own shares of the company and I'm not an executive I could be considered as independent but the problem is that I wouldn't feel free to evaluate independently the performance of Sergio Marchionne.
DeleteNo I'm not considered an independent director because i will have conflict of interests , My interests will not be aligned with the interests of the firm but with this shareholders interest.
DeleteAlberto Bonaventura your answer was great! I personally think that I would be an indipendent shareholder only if I do not have any significant economic, personal or other interests that may conflict with the interests of the company or shareholders. But actually even if I will meet all these criteria of "indipendence", I might be incapable of exercise indipendent judgement.
DeleteUnfortunately, I would not consider myself as indipendent. In fact, even if I can easily meet all the standards for indipendence, I would probably prove my self incapable of exercise an objective judegement. This is due to the fact that I lack the necessary professional background,
DeleteIt depends:
DeleteI cannot be considered independent, since the major shareholder appointed me.
But at the same time, I don't have shares and pecuniary relationships with the company. Thus, in this case, I can be considered as independent
To be really independent a director can not be appointed directly by the major shareholder, because will be very difficult for him criticize his employer.
DeleteI should be independent if I respect some positive attributes and I have no conflict of interests that can potentially create problems to me and to the company
Deletewithout conflict of interest and my interest align interest of firm, I can be independent..
DeleteAs it is the major shareholder, who is appointing me to be the director, I cannot be considered independent, as there is an existing relationship between me, the director and the shareholder of the firm. There will always be an interdependence between the appointment of the job and maybe some favours paid to the shareholder - thus making me dependent on the goodwill.
DeleteIn my opinion, can be considered indipendent as long as it has no economic interets nor shareholding relationships with the company.
Deleteit is controversial because i will not be considered dependent because i have nor material neither pecuniary relationships with the controlling party but the fact that is properly the major shareholder to appoint me could be considered a reason to justify a sort of dependency
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DeleteThe fact that a major shareholder has appointed me is not a reason to suppose that I am an independent shareholder
DeleteIf major shareholders appoints me it means that he knows me and that i am a way to protect his interest. A good example could be ENI spa, where the top management is appointed by the politicians, and, in many cases these members are very close to politicians view.
DeleteLuca Cordero di Montezemolo is not an independent director because he is part of the owners. And this will create a conflict of interest.
ReplyDeleteYes, you are right! I totally agree with you
Deleteand in this case can be so detrimental for firm
DeleteI totally agree with Orkhan!
DeleteOf couse. Totally agree with both of you.
DeleteJohn Elkann is not only Chairman of Fiat Board of Directors, but he is also president of the Holding "Exor S.p.a". and of the "s.a.p.a. Giovanni Agnelli e C". Is it normal or strange to see it? How much power does he have within the Board having this status?
ReplyDeleteJohn Elkann, thanks to his 'Exor S.p.a', finance both Fiat and Juventus, two organizations within the same group.
DeleteI think that this is a damage for the entire group because of the different interests, and because he may encourage only these two firms and neglet the others.
I'm completely agree with Silvia. Of course in this case we can have some conflicts of interest. He, being in the board of directors, has a lot of power to control the company by pursuing their own interests.
DeleteCould Exor be considered as a "Chinese Box" since its revenues come from "Partecipazioni" only?
DeleteI don't think we can consider Exor as a Chinese Box because it is true its revenues come from only "Partecipazioni" but Exor receives revenues directly from different companies without the step by step process among companies that own each others that characterizes the Chinese box model.
DeleteI am totally agree with Silvia Tabuani. It is possible because two organizations within the same group and this is a damage for the entire group because of the different interests, and because he may encourage only these two firms and neglect the others.
Deletei agree with Silvia partially , in fact it seems to be right that being a owner of 3 organization in the same time makes conflict of interest between them , but actually it depends on the way of managing and the separate interest of each one , and the main sector for each one , for example : Fiat is a vessel's producer but Juventus is a sport club and la stampa is a newspaper , so in my opinion it's not necessary to create a conflict of interest if u manage more than one organization
DeleteI think that when you reach this level is quite normal to be the owner of more than one company. The fact that one own two companies that operates in the same sector it's not necessary a bad thing: 1) increase competition--> companies will try to work harder to reach best results. 2) cover all consumers need--> it can be very expensive to differentiate products in a way to cover all possible needs and wants of costumers.
Deletethis is a damage for the board of directors because of the different interests and much power in the group..
DeleteI think this is very common. He finances both Fiat and Juventus that are part of the same group, and as a result he will have considerable power within the board.
DeleteQuestion: Can we solve the "problem" of excess of power within the group assigning stock options of weakest firms?
DeleteDear Lorenzo, do you remember about who are you speaking about? John Elkann is the man who has taken the biggest part of the inherits of Giovanni Agnelli ( the lawyer) and he is one of the most influential people in the industrial world. Especially in Italy is exremly normal to see this situation. According to me behind the choice to dismiss Montezemolo there is him, through his "person of trust" Marchionne.
DeleteSorry guys. I have a non-fiat-related question for you. I've heard about the figure of the "lead independent director". Can you please tell me which is his role and what are his responsibilities? Thank u very much
ReplyDeleteAs far as I know a Lead independent director is someone who works collaborately with the Chairman and the CEO of the company. He can call together meetings with independent directors and that also chairs the meetings.
DeleteThank u Erika!
DeleteIs it obligatory to have a lead independent director or it is up to the company to choose whether to have it or not?!
I think it can vary by the country and their national legislation. In addition, in my opinion, the position description of a lead independent director also varies by company.
DeleteIn my view, the lead director serves as an independent chief among all board members and thereby helps ensure board relations run smoothly.
DeleteLead directors drive high-performance boards. Many lead directors improve board performance by facilitating board discussions, by helping directors reach consensus, and by keeping board matters on track.
I agree with you thuy, a lead independent have to manage discussion, give his own opinion, he has to be the value added in a board
DeleteI agree too with ThuyLe, the Lead Independent Director have to be an Independent Director who acts as a leader of the board. But the most important task in my opinion is to ensure transparency within the board.
DeleteThe LID sholud (it is not compulsory, although highly recommended) be nominated whenever two events occur:
Delete1) The CEO sits in the vest of Chairman in the BoD
2) The owner (major shareholder) sits in the BoD in the vest of Chairman
What is the rationale of the conduct rule?
It is evident that if the major shareholder holds the direction of the BoD he might be tempted to not properly and timely inform the other directors on the main issues faced by the company so as to extract private benefit.
Therefore the appointment of a LID is aimed at monitoring the behavior of the Chairman (Agency Cost) ensuring that the information will be properly and timely released.
in two event..Right Alberto
DeleteI agree with all of you guys. The role of the lead independent director is to provide leadership to the independent directors, liaise with CEO on behalf of the independent directors and advise the board on matters where there may be cases of conflict of interest.
DeleteAnother important role of the LID is to call sessions composed only by independent directors and to preside over them. In this independent session the independent directors can exchange ideas each other far from the ifluence of the inside directors.
DeleteTotally agree with Alberto. It is foundamental the respect of this rules to avoid a sutiation of conflict of interest and especially a situation in which all the power is in the hand of the same person.
DeleteI agree with Erika, and in addition, I would say that according to the Italian corporate governance code, there are mainly 2 circumstances, in which the Board has to designate an indipendent director as 'LEAD' : 1) when the Chairman is the CEO of the company; 2) when the chairman's office is held by the person controlling the issuer.
ReplyDeleteYes you are right! Lead independent is the guaranty that the firm will be shareholders driven and not only for the shake of the chairman
DeleteI agree with both of you. The role of "lead independent director" is necessary in the case of CEO duality when the ceo is also the chairman of the board
ReplyDeleteGiulia, How can it be necessary in Ceo duality? Please explain for me...
DeleteIt is necessary in this situation because when too much power is concentrated in the hands of one person more control is needed.
DeleteIf we want to make a connection of this situation with scholars' analysis, we can observe that the perception towards CEO duality is still close to the agency theory, in which concentrating too much power in the hands of one person would be detrimental to the firm without the necessary control from the BoD.
In a stewardship theory perspective CEO duality could be beneficial to the firm, in that according to this stream of thoughts the CEO, who is a good steward to his firm, would be able to work more effectively by being alone. However this second theory, even though fascinating, is not yet fully applicable to reality, thus a lead independent director is absolutely necessary in a situation of CEO duality.
Of couse, as Alberto said before
DeleteJohn Elkann (Chairman and Chief Executive Officer of EXOR S.p.A, that controls Juventus football club s.p.a.) is a member of the Board of Directors of News Corp., the group that controls also Sky Italia; can we say that there is a conflict of interests?
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DeleteNo, I don't think so! There couldn't be conflict of interest! The most probable effect, on my point of view is a much more positive TV judgement, and nothing else!
DeleteIn my view, there might be a sort of conflict of interest. For example, what about when Sky has to decide how much to pay juventus for the TV rights or for a sponsor on their shirts ? Will he pursue the interests of Sky or those of Juventus ?
DeleteWhat do you mean with "positive tv judgement", Andrea?
DeleteI agree with Federico; if for example Exor had greater Cash flow rights from Juventus F.C. than from Sky networks, it would be likely to overpay the annual television rights to the football team in order to get more cash flow from Juventus at damage of Sky's shareholders.
DeleteI think there is a great conflict of interest. You can see it by the judgement that are given at the end of the match. Moreover, you can see how tv rights are splitted, that is, in an unfair way.
DeleteAnother curious aspect is related to Infront, that is in charge of the shots of the match: Juventus has their own directors for the match, and sometimes the shorts doesn't tell all the truth
yes, it can be possibile. We should consider that there are a lot of transactions between Sky corporation in prchiasing broadcast rights from football clubs!!!
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DeleteMaybe a situation of conflict of interest is possible especially if we look at the transactions between News Corp and Juventus about tv rights.
DeleteIt depends case.
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ReplyDeleteIs it okay to have the major shareholder as a chairman? why?
ReplyDeleteIn Italy is always like that; otherwise if the major shareholder is not chairman is the ultimate controlling party of the holding that control the company.
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