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Research & Publications

Research & Publications

SONEAN regularly publishes network analytic papers and provides here an overview of latest researches which we share with the public

The influential networks behind Germany`s largest listed companies (DAX-30)

SONEAN’s latest research into the social ties that connect Germany`s largest listed companies reveals some unique findings about the networks in which organizations and their leaders are embedded. We analyze over 4500 social ties that connect 395 executive managers and non-executive directors (not including employee representatives in the non-executive board). A special focus is dedicated to the role of network diversity, i.e. the unique ties (which don`t overlap) that executive (managers) and non-executive directors bring to the company. We show that the diversity discussion, which is currently being led by policy makers, creditors, investors, and shareholders alike, needs to go well beyond traditional measures such as gender, age, and e.g. ethnicity. Diversity of social ties is crucial when it comes to innovativeness, governance as well as performance of the company. We rank DAX-30 companies based on the following network and diversity measures: 1) Number of unique connections that executive managers bring to their DAX-30 companies 2) Number of unique connections that non-executive directors bring to their DAX-30 companies 3) The institutions that connect DAX-30 executives 4) The non-DAX-30 institutions that connect DAX-30 executives 5) The institutions that connect DAX-30 non-executive directors 6) The non-DAX-30 institutions that connect DAX-30 non-executive directors Women only hold 10.71 % of the executive jobs, and more striking is that none of the women has a CEO or CFO position (by the end of October 2016). Furthermore, the majority of their positions are in human resources (41 %). Overall, if you disregard employee representatives on the non-executive board, women hold 28.14% of non-executive positions and 20,79 % of all positions (including management and non-executive board jobs). We also analyzed the past end existing connections of the women in the DAX-30 companies and identified that at least 62% of the executive and non-executive positions are occupied by women who have prior and existing multiple ties that connect them to the male board members. This gives us the impression that most women are extensions of male networks and that the selection process is not necessarily an objective one but very much dependent on the level of connectivity of the women in management and on boards. The paper reveals some very interesting and unexpected findings, especially when it comes to the institutional networks behind DAX-30 management and non-executive boards providing unparalleled insights into the social make-up of Germany`s largest companies. It also complements our paper related to Europe`s largest 50 listed companies (see www.sonean.com/research-publications/) which you can refer to, in order to see the differences between the STOXX-50 and DAX-30 network related findings and the institutions behind both samples. Enjoy the reading!!

December 2016

The influential networks behind Germany`s largest listed companies (DAX-30)

Social Dependence of Independent Directors

Based on our extensive two year review of the largest listed 50 European companies (by market capitalization, STOXX 50), and their 445 executive as well as 476 non-executive directors (as of 1 January 2015) who represent these organizations, we have gained highly relevant insights into the social ties that connect these decision makers to over 13,000 organizations. Hereby we have gone beyond their academic (who studied with whom where) and professional links (who worked with whom previously), and followed a multiple tie approach including among others these directors` links to governments, foundations, think tanks, associations, the military, clubs, and many other organizations to uncover existing and prior ties. This paper, which just represents the tip of the iceberg when it comes to our overall findings, focuses on the role of so called “independent directors” as a subset of non-executive directors who have an important control function in corporations and are supposed to among others monitor the activities of executive managers /directors. In the largest 50 European companies we identified 121 independent directors (out of 476 non-executive directors) and based on our data see that at least 44 % have prior or existing ties (through university, past mutual jobs or other institutional ties) to their respective executive managers. From a social network perspective this leads us to the conclusion that these independent directors cannot be regarded as independent but be seen more as socially dependent. We therefore argue that existing social ties should therefore be incorporated in the definition of “independence” and transparently communicated. Thus it is not just enough to transparently share existing board memberships when directors join a new board but more importantly to declare who gave the impetus for joining the board and whether the new director has existing ties with either the executive or non-executive board members. This increased transparency will be vital to judge true independence and the objectivity of the hiring process for institutional investors (asset managers, and asset owners), i.e. shareholders in general. The descriptive statistics furthermore give you great insights into the dominating nationalities, universities, majors that executives and non-executives studied, and the mechanisms that are at play between existing independent directors and executive managers who are connected to each other. Enjoy the reading.

February 2015

Social Dependence of Independent Directors

The crucial role of SNA for investments in startup companies

Based on a proprietary analysis of over 2000 startup companies in mainly Germany and beyond (predominantly Europe) and their ties to over 500 relevant investors from across the world (angel investors, VC funds across all stages, ranging from the West Coast in the US to Hong Kong) which have invested in those startups, we highlight the importance of social network analysis (SNA). The dynamic network screening, the social capital related insights as well as ongoing portfolio as well as stakeholder monitoring represent just a fraction of possibilities when it comes to social network analysis` relevance for investing in the startup ecosystem. Whether you invest directly, search for co-investors as an investor or even funding as a startup, social network analytic insights will become mainstream in decision making complementing existing financial data in the future. We are convinced that in 5-10 years, SNA will be a fundamental pillar and a crucial dimension in investment decision making, complementing financial and non-financial (such as Environmental, Social, and Governance – ESG) factors to better predict outcomes. Investors with a fiduciary duty will thus be equipped with more insights and above all have much greater transparency to better understand the dynamics and take appropriate investment decisions. It will also help them to monitor their VC funds` and co-investors activities, and the embeddedness of startup companies in the respective ecosystem, assisting them to spot relevant opportunities and risks along the entire investment process. Welcome Tomorrow! Enjoy the reading.

September 2014

The crucial role of SNA for investments in startup companies