The Independent Directors in the Energy Utilities: An Empirical Analysis

Many commentators and institutional investors believe that independent directors are particularly effective in monitoring CEO and in avoiding managerial opportunistic behaviors. The role of independent directors may be particularly important in the case of public utilities where the government relations and the private-public ownership may divert CEO decisions from the maximization of firm performance. We conduct a study of whether independent directors and other board variables influence the performance, the growth and the dividend policy of European energy utilities. We find evidence that the relationship between firm performance and independent directors is negative and statistically significant. Using different econometric techniques and controlling for the type of control, our results show that independent directors are less concerned with the improvement of the shareholders’ value. This suggests that in the public utilities they may be a corporate mechanism that enhances stakeholders’ protection and social welfare rather than financial performance.