The UK's director daisy chain: Empirical evidence of the interconnectivity of directors of UK publicly traded companies

Independent non-executive directors (iNEDs) play a key role in UK corporate governance. This empirical, interdiscipliniary study explores how interconnected directors of UK companies listed on the London Stock Exchange are. This is the first article to deploy graph theory tools to the directors of all 767 UK companies listed on the LSE's main market. We find that 550 of these companies are linked by one large daisy chain that arises as a result of deployment of iNEDs. However, this network is sparse rather than dense - meaning that there are approximately 6 directorships needed to link any two directors together. This helps clarify the role that iNEDs can play in corporate governance - they can help combat managerial opportunism and excesses that are unique to a company. However, they are inherently linked within the same structural system, and therefore are less likely to be able to push the boundaries of conventional wisdom within corporate governance. Thus an iNED can protect shareholders against agency costs between shareholders and directors, but only insofar as those costs are out of step with wider practice across the corporate governance of listed companies.