Independent Directors and Controlling Shareholders Around the World

45 Pages Posted: 14 Jun 2014

See all articles by Guido Ferrarini

Guido Ferrarini

University of Genoa - Law Department and Centre for Law and Finance; European Corporate Governance Institute (ECGI)

Marilena Filippelli

Sapienza University of Rome - School of Law

Date Written: May 30, 2014


In this paper, we examine independent directors as a legal transplant from dispersed ownership systems to concentrated ownership ones. We focus on Continental Europe, Japan, Brazil, Russia, India and China. Our main thesis is that independent directors have a different and relatively narrower role to perform in controlled corporations. We also argue that in the law and practice of controlled corporations independent directors often play an even weaker role than economic theory would predict. In order to prove our thesis, we compare the legal regimes applicable to independent directors across countries. We find that the notion and functions of independent directors vary remarkably across our sample jurisdictions. Firstly, the role of independent directors is not always specified. Secondly, independent directors often play a role in audit committees and, less frequently, in nomination and remuneration committees. However, they are rarely tasked with the vetting of related-party transactions and other conflicts of interest situations. Moreover, controlling shareholders often perform some of the functions that are typical of independent directors in diffuse ownership, such as the hiring and firing of managers and the setting of their remuneration. We conclude that the weak role of independent directors in several countries shows that they are often appointed mainly to accommodate investors’ preference for western-style corporate governance.

Keywords: independent directors, board of directors, board committees, board elections, monitoring board, controlling shareholders, executive remuneration, related party transactions, self-dealing

JEL Classification: G34, K22

Suggested Citation

Ferrarini, Guido and Filippelli, Marilena, Independent Directors and Controlling Shareholders Around the World (May 30, 2014). European Corporate Governance Institute (ECGI) - Law Working Paper No. 258/2014, Available at SSRN: or

Guido Ferrarini

University of Genoa - Law Department and Centre for Law and Finance ( email )

Via Balbi, 22
16126 Genova, 16100
+39 010 209 9894 (Phone)
+39 010 209 9890 (Fax)


European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
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1000 Brussels


Marilena Filippelli (Contact Author)

Sapienza University of Rome - School of Law ( email )

Piazzale Aldo Moro, 5
Rome, 00159

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