KNOWLEDGE SHARING

Board Surveys & White Papers

We frequently publish new research, board surveys and white papers for the benefit of our members and stakeholders.

Our goal is to help companies and organizations as well as their management to navigate through changes, to grow the business, increase diversity and to establish the best practice within corporate governance and board leadership.

Most of the knowledge we gather through our surveys and studies is used in our physical network groups.

PARTICIPATE IN THE NEW GLOBAL SURVEY

Board Network along with InterSearch – Worldwide Organization of Executive Search Firms – is currently implementing the 2022 edition of our annual global board survey. Last year we received input from a total of 1,782 respondents from 79 countries.

The survey takes approx. 10-15 min. to complete, and all responses are given anonymously and confidentially. If you would like to participate, please simply click on the link.

In return for your inconvenience, we will of course offer you access to the complete report with all the survey data when the final version is available (expected in November 2022). Thanks in advance for your input.

Board Surveys & White Papers

Global Board Survey 2024

Boards In a Darwinistic Age

2023 saw major events – politically as well as business-wise – that only few would have predicted. Across the world, we are now witnessing wars, political dogma shifts, greater polarization, technological advancements, business model innovation breakthroughs, geopolitical turbulence, terrorism, migration streams, artificial intelligence unfolding, climate change rapidly developing, alternative facts and fake news allegations, digitization of services and products, anti-woke movements, cybercriminals playing a real role in the agenda-setting, etc. Coming from this, corporate boards have never attracted more attention than what we see today; from how they are composed over the influence they carry to how they act and perform, attention is received from the entire organization internally, all the way from the man or woman on the floor and all the way up to the C-suite, but also from politicians, public authorities, media, investors and all the rest of the business environment. With global supply- and value-chains but with growing trends of nationalism, supplemented by corporate scandals, many judged from new ethical standards, and adding increased investor activism, we have all the ingredients needed to put further pressure on the individual contributions to the board and the overall performance by the board. The number of operational activities, and the detail of these activities to which the board is expected to be familiar with, is growing rapidly. The days when business leaders only had to worry about making profits and steering clear of illegalities have long gone. Today, responsibilities and expectations on executives as well as non- executives are much more versatile and subject to significantly tougher scrutiny. This puts a tremendous pressure on political, public, and not least business leaders. They are the ones with the ultimate responsibility for the long-term viability and survival of the businesses they head up – all in a time where the competition can prove to have many forms; size, speed, access to resources, and many more. Survival will only be for the fittest. Between January – February 2024, we asked around our sizeable global network of chairs and board members, and we are very proud to hereby present to you the findings of our Global Board Survey 2024 – Boards in a Darwinistic Age.

Global Board Survey 2021

Boards In Flux

As 2021 is coming to an end it is becoming clear that the unprecedented state of flux which the world has been in since the outbreak of the Covid19-pandemic around beginning of 2020, is not going to end anytime soon. New variants of the virus keep surfacing, numbers of infected people are surging most places, vaccines are still unequally distributed globally and mind you also unequally welcomed amongst a number of people in those countries that actually do have access to a sufficient supply of vaccine doses, health care systems are under various levels of pressure and distress, supply chains are constantly being interrupted, and production entities as well as transportation channels are less predictable than ever before in the past two decades. However, there still seems to be ambiguity among politicians, business leaders and economists as to whether or not we are facing a global scenario of high inflation rates, falling stock prices, shortage of raw materials such as copper, silicon and lithium, etc. In some regions, economies are still very strong, while in others the financial systems and economic politics are being tested. In some countries, financial liquidity is better than ever before, while others go through a scenario resembling the great depression the 30’es. Thus, the global business weather forecast for 2022 surely speaks of both dense fog and strong winds. Add to this an increasingly unstable geopolitical situation with tension around and/or between countries like Russia, Ukraine, Belarus, the EU, USA, China, Afghanistan, Australia, Turkey, Iran, and many more, plus more and more extreme weather implications from climate change, a divisive media scene, greater political polarization, and spiking numbers of cyber crime incidents, you have yourself a melting pot of both threats and opportunities – which in China is known as Wei Ji – which translates into ‘crisis’ in English. The important thing to remember however is exactly that of the implied opportunities that a crisis also beholds. The ability to steer through the opacity of a disrupted yet still heavily interdependent global business world will in the coming year either qualify or disqualify corporate boards like never before. Even more so it is remarkable to see that a majority of global boards remain optimistic about the future for their companies, and vigilant in their efforts to keep professionalizing their own boards. Between September and November 2021, we asked around our sizeable global network of chairs and board members, and we are very proud to hereby present to you the findings of our Global Board Survey 2021 – Boards in Flux. We have been looking at what’s hot, what’s not and what’s next within Corporate Governance and Board Leadership – because we know that what drives the board will always most certainly cascade down to executive management and from there further down the organization. Some boards we can look to for inspiration, others will more seek to be inspired themselves. We have investigated how boards are composed, how they work together, what and how they prioritize, and what they believe the future beholds for themselves, their companies and the world overall. We dig into where they feel comfortable, and in which areas they could innovate or improve. We look into their position on various elements of the strategic picture, and on competencies they feel lacking. Or in other words; we investigate how boards adapt to a state of constant flux – and what that implies for the companies they steward.

Global Board Survey 2020

The Purposeful Board

Never has the world seen more rapid changes, the economy been more volatile, the climate situation been more uncertain, markets seen more disruption, the media scene been more ambiguous, and only rarely has the geopolitical situation been more complex. Implications on businesses are tremendous. Opacity has become the default in any and all industries when it comes to how strategies are being determined and milestones being set. Not surprisingly, this also carries direct consequences for leaders of businesses – not just among the C-suite but equally much for boards of directors. The days when business leaders only had to worry about making profits and steering clear of illegalities are long gone. Today, responsibilities and expectations on executives as well as non-executives are much more versatile and subject to significantly tougher scrutiny. No board anywhere on the globe will claim it to be easy to prioritize today’s agenda of strategic transformations, disruptive innovation, sustainable development, servicing shareholders and proxy advisors, formulating a meaningful why to furnish a strong employer brand, managing risks not only of operational but also of financial and digital nature, ensuring the highest possible standards of diversity and inclusion, deploying initiatives to ensure health and safety for all customers and employees, mitigating geopolitical uncertainty and unexpected regulatory changes, staying friendly with banks and investors, and not least doing right while doing good, ie. keeping ethical standards high in leadership and business practices while also ensuring that the company engages actively in supporting (at least some of) the 17 UN Sustainable Development Goals. It’s no wonder that boards across the globe increasingly show signs of mental respiratory distress as they try to keep afoot with the broader expectations of stakeholders at large. Yet, a number of boards do succeed under this new paradigm while others don’t. What is the secret sauce in the recipe of the successful ones? Is it in the composition? The board dynamics? The leadership vision and practices of the chair? In the number of hours spent? Perhaps a combination of them all – or maybe something entirely different. That is what we are investigating in this report. In January and February 2020, we asked around our sizeable global network of chairs and board members, and we are very proud to hereby present to you the findings of our Global Board Survey 2020 – The Purposeful Board. We have been looking at what’s hot, what’s not and what’s next within Corporate Governance and Board Leadership – because we know that what drives the board will always most certainly cascade down to executive management and from there further down the organization. Some boards we can look to for inspiration, others will more seek to be inspired themselves. We have investigated how boards are composed, how they work together, what and how they prioritize, and what they believe the future beholds for themselves, their companies and the world overall. One unveiling conclusion at this early stage: We see that one of the distinct characteristics of the truly effective and value-adding boards, is the shared vision of wanting to make a positive difference – obviously for the company but increasingly also in a broader societal context. In other words, boards that we can categorize as The Purposeful Boards.

Nordic Board Survey 2020

The Future-Proof Board

Valcon, the Scandinavian management consulting firm, and Board Network, The Danish Professional Directors Association, conducted a Scandinavian survey among corporate board chairs and board members to gain their view on the most significant trends, changes and challenges. We asked them to tell us how ready their companies and organisations were to act in a world with an unprecedented level of complexity and uncertainty. We also asked them to share with us their views on the board’s role in developing a future-proof company, a company ready to handle this complexity and uncertainty. We furthermore conducted interviews with several leading board members who shared their own perspectives on the challenges and opportunities in establishing a future-proof organisation, not least the challenges of defining the role of the board in such an organisation. HERE IS WHAT WE LEARNED 3 In short, the boards evaluated themselves as ready for the future. 265 Scandinavian board members rated the boards as well as the organisations highly in aspects of what it means to be future-proof. The board members answered favourably when it came to evaluations of the board’s focus on continuous improvement and development of the organisation as well as ongoing adjustments of the organisation. Overall, the picture painted by the respondents shows that the boards are ready for disruption of their markets and changing customer needs and that they know the importance of continuously developing the strategy and processes to reflect these changing market conditions. It would also appear that the boards have confidence in their organisations’ future-proof state. They rated their organisations almost as highly as themselves in terms of ability to adapt to the changing needs of customers and to have the necessary insights and relevant processes in place.

Board Perspectives

Board perspectives nr. 28

April 2021

The first upcoming physical meeting will be on Thursday the 3rd of June where we hope that infection rates, vaccination efforts and assembly restrictions are all at a level that makes it possible for us to gather again. Until then, we hope that all our loyal members will participate virtually – respectively the 28th of April and the 18th of May. Tendencies and changes are on the board agenda in 2021. Every year Board Network – The Danish Professional Directors Association together with the headhunter company Case Rose / InterSearch identifies the strongest trends and interesting topics, which in the coming year will form the primary framework for the exercise of the board´s work. We focus on the most significant matters We focus on the most significant matters, which will begin to show themselves or whose significance for the board’s work will be strongly enhanced, which will thus affect the upper management layers in the company. Some trends result from legislation, others from soft law, some from international influence, others from market reasons and finally some as a result of larger, external megatrends. The obvious huge influence on the trends this year is of course the still prevailing Corona pandemic. In this year’s analysis, we have therefore identified the following points which will set the agenda for the majority of boards in 2021: 1. The WHY has never been more important. In times of crisis and recession, disagreements and conflicts tend to arise more easily. When everyone feels worn out in terms of health, finances, safety, freedom and/or quality of life, then in every context there is a need for a greater purpose that can bring people together and make them move closer so common goals can be achieved. After more than a year of profound/epoch-making pandemic, the importance of The WHY has proven truer than ever. This is also the case for Danish companies, where work from home and digital meetings in one never-ending race have worn down job satisfaction and motivation to such an extent – and conversely increased the stress level. Imagine if, as an employee, you had to go through all this without knowing the higher purpose? Unfortunately, there are still many who have to – and that is precisely why it will be so incredibly important that the boards, as the highest management, manage to communicate precisely the WHY of their company unequivocally/unambiguously – to employees, customers, suppliers, shareholders besides the stakeholders. 2. Risk Mapping / Scenario Planning has changed in character and meaning. Again, the pandemic is the big factor. It suddenly dawned on us that traditional risk maps with a probability/severity curve are not satisfactory. On the one hand, very few of us had believed that a global pandemic could have such extreme side effects in the form of global restrictions and orders, and on the other hand, the probability of such a pandemic was so low, seen in the eyes of most, that it never figured on their risk map. At the same time, it dawned on us that even in modus of eternal agility and disruption readiness, there are still processes and workflows that we have taken for granted. Here you have been able to find great inspiration in many companies’ transitions from budgeting to rolling forecasts in the financial function – in the form of a constant update of our scenario plans in connection with the development of the pandemic and its constantly changing impact on business´, markets, supply chains, etc. 3. Emergency Succession Plans have also been necessary to put on the agenda for all boards. How are you positioned if one or more members of the executive board are suddenly sick – or even dead? Or if one or more board members are suddenly long-term or permanently unavailable? Succession planning is generally an area where, in the many board evaluations we facilitate each year, we see both a great need and a recognized desire for significant improvement. It has never been more important! 4. Security Issues have also multiplied in both number and consequence over the past 15 months. Not only has cyber risk, for example, generally been a “business” in eternal exponential growth, however with such a sudden transition to homeworking for all organizational layers, as the Corona pandemic has offered, the attacks and uncertainty have exploded. This is naturally due to the typically much lower IT security that most of our homes are surrounded by compared to the workplace. Moreover, the physical security is typically of a lower standard in our homes, which offers completely new risk prevention considerations for the boards. 5. Change in Work Patterns. It is mentioned above, but also needs its own completely independent point. In our Nordic board survey from autumn 2020 (with 251 respondents), we could see that fully 81% of boards had switched to virtual board meetings, while 46% had held more meetings than planned. This has forced many IT-inexperienced board members to suddenly have to familiarize themselves with the many possibilities of technology (which must be considered a plus), but it has also reduced the number of strategic and more innovation-oriented discussions in the boards. This kind of discussion unfolds unequivocally/unambiguously best in a room where everyone is present at the same time. 6. Increased Push for Digitization. Imagine that the pandemic had hit us in 2000. In that case, we would have had to try to…

Board Perspectives nr. 27

December 2020

Welcome to this twenty-seventh issue of Board Perspectives from Board Network, The Danish Professional Directors Association. Board Perspectives is aimed at everyone who is interested in the board agenda in Denmark and is the most outstanding Danish publication with a focus on Corporate Governance and Board Leadership. Board Perspectives is published quarterly – and offers several articles in each issue, written by leading, external experts as well as interviews, news and much more. The focus is on content over form – and on news angles and approaches with an edge. In this issue, partly through a Nordic board survey with a total of 251 respondents, we have zoomed in on the top managers’ and boards’ handling of what is probably the biggest global crisis in peacetime; The Covid19 pandemic, partly we have conducted qualitative interviews with seven leading board chairmen. Thanks to Lilian Mogensen, Mie Krog, Jesper Jarlbæk, Lars-Christian Brask, Steen Parsholt, Jesper Lok and Christian Sagild! Finally, we have received contributions from Klaus Stubkjær Andersen (RiskPoint) regarding the price development of D&O insurance, as well as from Kirsten Aaskov Mikkelsen and Martin Faarborg (both Deloitte) regarding the just published Corporate Governance recommendations. A big thank you also to Klaus, Kirsten, and Martin. Board Network expands – and moves to new and larger premises in Hellerup Despite Covid19, we at Board Network have been extremely busy in 2020 and have thus expanded both the activities and the organization.

You may already have had the opportunity to speak to our new colleagues, Patrick Stochflet Nielsen, and Nikolaj Anthony Schmidt – but otherwise we hope that you would like to stop by us at the start of the new year in our new domicile at Strandvejen 100, 2900 Hellerup! The next meeting will therefore be on Tuesday the 9th of March, where we hope that the infection rate, vaccination efforts and assembly restrictions are all at a level that makes it possible for us to gather again. As mentioned, the theme is “Governance for the Long-Term”, where the focus is on the Nordic governance model, which has always been known for its sustainable and long-term focus. It comes i.a. expressed in the ownership structures, where e.g., the family ownership, the foundations and the pension funds have always played a big role. This can also be seen in the world-leading position that the Nordic countries always have played in the prioritization of sustainability, triple bottom line, value-based management, the company’s why and the SDGs.

We are very much looking forward to this exciting day with a usual strong line-up of both Danish and international speakers! More on this will follow soon. Our latest initiative – The Chambers On countless calls, we have spent the summer and autumn creating and putting together a genuine novelty: The Chambers! The Chambers are different, smaller groups of max. 18 members each, where all members get access to the latest trends, the newest research, the most skilled facilitators, the sharpest speakers – and not least a smaller and confidential peer-to-peer forum with the very best conditions for sparring, knowledge sharing and exchange of experience. We are very proud that we have already managed to put together four full groups – and have started the recruitment for three further groups. It is worth noting that we are establishing independent groups on both sides of ’Storebælt’ (Zealand and Jutland) – to also be able to satisfy the high demand in Jutland and Funen. In The Chambers, we meet five times a year in a roundtable format. Similar to our “normal” conferences in The Community, all meetings are held confidentially under The Chatham House Rule. Membership is personal and new members are admitted continuously. Contact us at info@boardnetwork.dk if you have any questions about this and/or wish to apply for membership. Welcome again to the twenty-seventh issue of Board Perspectives. We wish you a really good reading.

Board Perspectives nr. 26

July 2020

Welcome to this twenty-sixth issue of Board Perspectives from Board Network, The Danish Professional Directors Association. Board Perspectives is aimed at everyone who is interested in the board agenda in Denmark and is the most outstanding Danish publication with a focus on Corporate Governance and Board Leadership. Board Perspectives is published quarterly – and each issue offers a number of articles, written by leading, external experts as well as interviews, news and much more. The focus is on content over form – and on news angles and approaches with an edge. In this special issue, where we have zoomed in very closely on the top managers’ and boards’ handling of what is probably the biggest global crisis in peacetime; Covid19 pandemic, we have received contributions from 25 Scandinavian top managers. Thus, we conducted interviews with 16 Danes, 6 Norwegians and 3 Swedes in June and July. Of these 17 have been men, 8 women, and out of the 25, 15 are board professionals and 10 are C-suite executives. How have Scandinavia’s leading business leaders tackled all the never-before-seen challenges? And how have they been able to identify and exploit new opportunities? In this edition of Board Perspectives, you get the first-hand reports of the tough decisions, the actions that have been made and the personal learnings. “When you’re going through hell, keep going” (Winston Churchill) It is probably not too much to say that Covid19 has hit the entire globe like a real Black Swan – despite numerous, also significant voices, in the global debate over the last 10 years, about the increasing risk of a real, life-threatening pandemic, the majority of the world’s state leaders, health authorities, top managers and advisers, only an extremely few have taken this risk really seriously. We had learned from previous outbreaks of e.g., SARS and MERS, that Corona viruses etc. were relatively easy to detect and contain – not at least because of the short incubation period and high fatality rate – i.e., short incubation period and high fatality rate. Thus, we believed that if a pandemic ever flared up again, we would easily be able to contain and suppress it. How wrong were we right there!? Thousands of annual risk maps in even the largest and most well-managed international groups may have scored a pandemic high on severity, but so low on probability that the risk has completely slipped out of the risk map. And the companies have not been alone; The Danish government’s sale of the Statens Serum Institut’s vaccine production and virtually all EU countries’ lack of sufficient stocks of reliable protective equipment are just two examples of how we grossly underestimated the risk of a pandemic like Covid19.

Even worse, however, it has been that so incredibly few had made it clear how inter-dependent our world and our business life everywhere has become in terms of the fierce globalization of the last two decades. An outbreak and a resulting lockdown in e.g., China could thus immediately be read in the supply chains in the rest of the world. Because we didn’t have the imagination to imagine an industrial and production scenario that reminded just a little of the whole defining moment in the financial crisis, The crash of Lehmann Brothers. Otherwise, Lehmann was precisely the worst imaginable domino piece that could topple at the time – because it was the most interconnected bank with the most external relations to other financial institutions – in the entire global financial sector! Ergo, in early 2020, the whole world was “sitting ducks” in a real life-threatening Corona pandemic – and we could all witness that we were left to a reactive crisis management scenario. And how did it go? Incredibly different – both between countries that chose almost identical solutions – and (of course) also between countries that chose very opposite solutions. It is not our intention to point fingers at anyone here – no one at Board Network had made these risks clearer than anyone else. It is just an observation that we should probably rethink at least the following elements in our governance models – and this applies to all companies, not just the largest: 1. Cash is once again King! Being able to draw on solid liquidity has been a clear competitive advantage through this crisis 2. Single-stranded but long supply chains are extremely vulnerable – and should thus be immediately revised to combine min. one new (series of) supplier(s) – in a different country, and preferably also on a different continent, than the primary supplier 3. Long chain of command with considerable amounts of bureaucracy in the decision-making process is not appropriate. The art going forward will be to balance this consideration against the increasing demands of the outside world for compliance and documentation. One possible solution is to take advantage of the digital quantum leap, which the crisis’ pronounced use of Skype, Zoom and Teams has increased…

Board Perspectives nr. 25

March 2020

Welcome to the twenty-fifth issue of Board Perspectives from Board Network, The Danish Professional Directors Association. Board Perspectives is aimed at everyone who is interested in the board agenda in Denmark and is the most outstanding Danish publication with a focus on Corporate Governance and Board Leadership. Board Perspectives is published quarterly – and each issue offers several articles, written by leading, external experts as well as interviews, news and much more. The focus is on content over form – and on news angles and approaches with an edge. In this issue, we have received contributions from Nordic CEO & Partner Anders Dons and Head of Corporate Governance & Partner Martin Faarborg, both Deloitte, Senior Security Advisor Jesper Helbrandt, IFCR, Liabilities Underwriter Jens Zakarias, RiskPoint, Partner Anne Sophie Scavenius, Mannov, Chairman of the Board Poul Skadhede, Valcon, Country Manager Daniel Hansen, Admincontrol, and Head of PR Nikolaj Henum, AVT Business School. “Businesses must have a purpose beyond profit” Since recently, Board Network, in close collaboration with one of the world’s largest and leading headhunting companies, InterSearch, has conducted the largest board survey ever with a Danish benchmark; Global Board Survey 2010 – The Purposeful Board. The report is based on a global survey with a total of 1,592 board members from 72 countries and will be published on the 10th of March 2020.

From this survey, it appears that the strongest megatrend among global board members is climate change for the first time ever. Similarly, the leading global board trend is for the first time the increased focus on sustainability. This is a significant shift from a clear focus on digitalization, innovation, and growth to a much greater degree of including social, environmental and stakeholder considerations in the overall running and management of companies – not just in Denmark, but worldwide.

Corporate Governance

OECD Corporate Governance Factbook 2017

The OECD Corporate Governance Factbook (the Factbook) supports the implementation of good corporate governance practices by providing an easily accessible and up-to-date, factual underpinning for understanding countries’ institutional, legal and regulatory frameworks Governments may use the Factbook to compare their own frameworks with that of other countries or to obtain information about practices in specific jurisdictions. The Factbook compiles information gathered from OECD and non-OECD delegates to the OECD Corporate Governance Committee as part of its ongoing work. The core information in the Factbook is taken from OECD thematic reviews covering how OECD and Financial Stability Board member jurisdictions address major corporate governance challenges that came into focus following the 2008 crisis: board practices (including remuneration); the role of institutional investors; related party transactions and minority shareholder rights; board member nomination and election; supervision and enforcement; and risk management. Additional sections address the corporate governance landscape including ownership patterns, the role of stock exchanges and regulators, and the cross-border application of listing requirements. First published in 2014, the Factbook has been updated and expanded to cover 47 jurisdictions. This includes countries that the Corporate Governance Committee has reviewed as part of the accession process to become members of the OECD. (As not every jurisdiction provided information for every table, in some cases summaries refer to a smaller number of jurisdictions.) The Factbook is divided into four main areas that are crucial for understanding how corporate governance functions in different jurisdictions: 1) the corporate landscape; 2) the corporate governance framework; 3) the rights of shareholders and key ownership functions; and 4) the corporate board of directors. These areas in turn are subdivided into 15 sub-topics. Each sub-topic has two parts: an overview of highlights and aggregate trends that emerge through a review of the more detailed and comprehensive tabular information that comprises the second part. The tables include information on the 35 OECD countries (now including Latvia which joined the OECD in 2016) to the extent available. Other jurisdictions covered include Argentina; Brazil; China, Colombia, Hong Kong, China; India; Indonesia; Lithuania; the Russian Federation; Saudi Arabia; Singapore and South Africa. The information in this third edition of the Factbook is updated as of end 2016. This edition was prepared by Daniel Blume with the support of Akito Konagaya, Caio de Oliveira and other members of the Corporate Affairs Division of the OECD Directorate for Financial and Enterprise Affairs.

A Guide to Corporate Governance Practices in the European Union 2015

As one of the most rapidly changing corporate governance environments in the world, Europe represents a microcosm of the exciting innovation happening in the corporate governance arena, ranging from new approaches to board-level corporate governance practices to changes in regulatory requirements at the legislative level. Representing a diverse mix of nations at various stages of economic development and market maturity, the European Union as an entity is demonstrating the broad value of a prioritized focus on corporate governance while accounting for individual country and company circumstances. This publication, A Guide to Corporate Governance Practices in the European Union, offers an overview of the changes taking place across the EU’s corporate governance landscape. It provides a focused examination of specific regulations and practices as well as a frank assessment of the challenges that remain. The publication also looks at firm-level actions that have improved disclosure and transparency in areas such as accounting accuracy, rights of minority shareholders, related-party transactions, remuneration, and takeovers. Such changes have yielded significant and positive results, even as some governance-related disputes do continue. The value of this publication is that it examines the issues from all sides. It assesses the steps forward and steps backward, the progress made and the gaps that remain, presenting the sometimes widely varying perspectives of owners, boards, management, and other stakeholders to create a complete picture of the European corporate governance environment. IFC has long focused on corporate governance as part of our broader efforts to promote private sector investment, strengthen capital markets, and foster inclusive economic development and growth. We are pleased to partner with the European Confederation of Directors’ Associations on this publication, which offers deep insights into effective governance approaches and emphasizes the importance of good corporate governance practices at all levels. On behalf of IFC, I extend my sincerest thanks to Chris Pierce and the many others who contributed to this valuable guidebook.

Study on Directors' Duties and Liability 2013

Overview The liability regime of executive and non-executive directors in companies constitutes a necessary corollary to control issues within a company. It is based on the determination of specific duties, it establishes the limits of management behaviour and it provides stakeholders and third parties dealing with the company with legislative protection against management misconduct. In that respect, directors’ liability is an important and effective compliance and risk-allocation mechanism. The European Commission has not, to date, considered directors’ liability issues in a comprehensive way. It is the purpose of this study to provide the relevant information in a comprehensive manner, in order to support to European Commission to consider its future policy in this area. To this end, the analysis spans from national laws and case law to corporate practice in respect of companies’ directors duties in all 27 EU Member States and Croatia.1 The overarching goal is to provide for a better understanding of certain important drivers of directors’ behaviour. This study shows the extent to which the content and extent of duties and the corresponding liabilities, as well as the understanding of the persons to whom they are owed, fluctuate over the life of a company, i.e. during the “normal” phase of operation, and in the so called “twilight zone”, i.e. shortly before insolvency. The study is mainly a stocktaking one. However, its comparative analysis also identifies similarities and differences between national regimes and identifies relevant cross-border implications. Mapping directors’ duties Apart from taking stock of the national regimes in 28 detailed country reports (cf. Annex), this study provides a comprehensive comparison of those elements of the law that appear relevant to further policy decisions to be taken by the European Commission. The comparative-analytical part strives to identify similarities, differences and trends in the relevant national laws of Member States, and to aggregate that information in an accessible manner. The comparative-analytical part uses maps, allowing the user to easily grasp the core information on each of the relevant aspects. Extensive tables aggregating statutory and case law allow for quick reference and a critical discussion of the EUwide treatment of each of the issues. The findings in respect of the relevant issues are set out below, followed by an overall assessment of the current legal landscape governing directors’ duties and liabilities in the EU. Organisation and structure of boards in Europe This study first analyses the differences in board structures used and available across the EU. Despite recent trends of regulatory convergence regarding board structures, there is still a significant degree of variation between the company laws of the EU Member States. The variation exists in the basic board structure (especially with regards to the distinction between one-tier and two-tier boards), as well as in relation to other aspects of company board make-up, such as election/nomination rights and the participation of employees. Differences in board structures can have a significant impact on both the extent and content of directors’ duties and liabilities, as well as on the enforcement of these duties.

Annex to Study on Directors' Duties and Liability 2013

1.1 Austria’s regulatory regime Austria is a civil law jurisdiction, thus the applicable law is primarily based on statutes.1 The General Civil Code (Allgemeines Bürgerliches Gesetzbuch) sets out the general rules regarding property law and the law of obligations, including contract law and tort law. The initial source of company law has been the Commercial Code (Handelsgesetzbuch), restated and renamed Business Enterprise Code (Unternehmensgesetzbuch) in 2006, which – to the extent it specifies, supplements or alters general provisions set out in the General Civil Code – is lex specialis in relation to the General Civil Code and, therefore, its applicability prevails in this relation. On the one hand it contains general provisions about companies, company names, the companies registers, asset deals, etc., but on the other hand it also sets out the special provisions for two forms of partnership, the general partnership (Offene Gesellschaft; OG)2 and the limited partnership (Kommanditgesellschaft; KG)3 . Special codes set out the legal framework for the public limited company, the Stock Corporation Act (Aktiengesetz; AktG), and the private limited company, the Act on Limited Liability Companies (GmbH-Gesetz; GmbH-G), respectively. These codes contain the key general provisions on directors’ duties and liability, whereby such general provisions are – from a practical perspective – most notably further specified under Austrian accounting and insolvency law. In addition, Supreme Court4 rulings specify and enhance the general rules set out under statutory law. This is particularly relevant in the field of corporate law. In this respect, the Austrian Supreme Court is primarily guided by two determinants, namely (i) German jurisprudence, since Austrian company law still features quite strong similarities with German company law5 , and (ii) Austrian and German legal literature (regularly cited in judgments supporting and justifying the court’s view)6 . 1.1.1 The private limited company The Austrian private limited company (Gesellschaft mit beschränkter Haftung, short GmbH) is established by setting up a corporate statute (in the form of a notarial deed) to be filed with the Companies Register. Upon registration with the Companies Register, which inter alia requires the appointment of at least one director,7 the limited private company is deemed incorporated. Its obligatory minimum registered capital amounts to 35,000 Euros8 and, unless otherwise provided for, its members participate in the company relative to their interest in the company’s registered share capital (i.e. relative to their investment). The private limited company is a legal entity. It has at least one shareholder (from a practical perspective the vast majority of private limited companies have no more than five shareholders). At least one director is to be appointed by the shareholder(s). The private limited company usually operates on a one-tier board structure, although the shareholders do