Active Owners and Accountable Directors

Abstract

You would never find a lawyer saying: what is in a name? We know too well that you can frame an argument simply by choosing the right words. Who would oppose ‘independent’ directors? The answer, of course, is nobody and thus company law in the EU has in the past two decades been permeated by requirements that all or at least a substantial number of directors should be independent. We may equally well ask who would oppose ‘accountable’ directors and expect the same initial response of general approval. But upon closer inspection they are mutually irreconcilable. Although a tantalising prospect, especially in politics, you cannot have your cake and eat it. A director is either independent or accountable.

We must choose, and this contribution argues that our choice should be what it has been for a very long time in Nordic company law, that is, the latter option of accountability. But what is even more important is the premise that there is and should be a choice. Ideally, within each Member State, a choice should be available for each company to make, and as the very least each Member State should be free to make that choice unrestrained by EU law; this fundamental tenet of company law is ill-suited for harmonisation in any form.

Keywords: independent directors, active owners, accountability

JEL Classification: K22