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06 October 2004

Corporate Governance: Commission recommendation on Independent Directors

The Commission published a recommendation to reinforce the presence and role of independent non-executive directors on listed companiesf boards. Protecting shareholders, employees and the public against potential conflicts of interest, by an independent check on management decisions, is particularly important to restore confidence in financial markets after recent scandals. The Commission has also adopted a Recommendation on directorsf remuneration.

The main principles in the Recommendation are:

  • The administrative, managerial and supervisory bodies should include overall an appropriate balance of executive/managing and non-executive/supervisory directors so that no individual or small group can dominate decision-making.
  • Boards should be organised so that a sufficient number of independent non-executive or supervisory directors play an effective role in defining and dealing with potential conflicts of interest.
  • A director is considered independent when free from any business, family or other relationship which might jeopardise his or her judgement.
  • The (supervisory) board should be composed of members who have the diversity of knowledge, judgement and experience to properly complete their tasks.
  • All directors should devote to their duties the necessary time and attention.

    Press release

    © European Commission

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