Views on the Indefinable Independence: Results from a Survey Among Supervisory Directors in the Netherlands

Independence of internal supervisors is an important part of corporate governance and is seen as a necessary condition to guarantee the quality of monitoring. After the corporate scandals at the start of this century the demand for independent members in the board and in the key committees has significantly increased. However, a clear and consistent definition of independence lacks. Definitions and interpretations of independence differ between countries, corporate governance codes and board systems. This study investigates whether these interpretations of independence differ as well between different groups of internal supervisors. It questions internal supervisors on situations that are real threats for independence and on the stakeholders an internal supervisor should take care of. The inclusion of personal relationships in the lists of independence criteria is one of the focal points of the survey. The results show that internal supervisors consider personal relationships as a threat for independence, but they regard business and family relations as larger threats. A cluster analysis shows that two groups of internal supervisors can be distinguished. One group is more inclined to monitor for stakeholders other than shareholders and has more concerns about threats for independence. This group is also significantly younger, more female and gets less paid. The second group is more inclined to monitor for shareholders and is more male and better paid.