Board Accountability in Europe: A Review of Director Election Practices Across the Region
• State Street Global Advisors ('SSGA') believes that board accountability is fundamental to strong corporate governance; annual director elections provide increased accountability and encourage board members to be more responsive to shareholder interests thereby improving board quality.
• There is still significant variation in director election terms in Western Europe which ultimately impacts board quality. Within Europe, board accountability is weakest among German companies, where directors stand for election only once every five years.
• Other European markets with weak board accountability include France, Spain, Netherlands and Belgium, where board terms are 4-year but due to staggered board elections, at least a portion of the board is up for election in any given year.
• The excessive terms of office in Germany and other European markets will be a key area of focus for SSGA's Asset Stewardship Team for the following year. In our view, the problem of excessive terms of office would best be addressed at market level. Investors, companies and regulators need to work together to promote change and we aim to push for positive systemic market-wide change on this issue.