Independent supervision in the association of capital, a legal and economic study

The purpose of this article is to provide an answer to the question whether bringing independent members into the supervisory boards of the associations of capital is effective from the economic point of view, i.e. whether it contributes to the increase of the shareholders’ profits.

The analysis covers only independence of the monitoring body vis-à-vis the corporations’ management boards. Since there are limitations to this paper, other important issues have been omitted, such as, for example, how the existence of a separate independent supervisory body affects the protection of minority shareholders against the dominance of majority shareholders.

The empirical research has been presented to show that independence is not the way to improve effectiveness, and if it goes too far or is misunderstood, it may even lead to its limitation. The final conclusion is that de lege ferenda it would be advisable to focus rather on the provisions that ensure a reliable audit of listed companies, introduce mechanisms that enable the strict fulfilment of disclosure obligations by them and the enforcement of penalties for any failure to adhere to such mechanisms so as to increase public access to information about listed companies rather than strive for ensuring that there are no links between the supervisory board members and the management board, the shareholders or the company.

Joanna Dominowska
Zeszyty Naukowe Kolegium Zarządzania I Finansów SGH, nr 12 z 2013 r.