Director Essentials: Subsidiary Governance

No matter what type of companies directors serve in their careers—public, private, or nonprofit—they may at some point become involved in subsidiary governance.

Subsidiary governance is particularly important in large public companies, which may have hundreds of subsidiaries. It is difficult to determine the exact number of subsidiaries that exist globally, but a 2025 study of 696 listed on 17 stock exchanges in the US and Europe found that they collectively owned or controlled 118,225 subsidiaries.

Subsidiaries are generally not required to have their own boards since they can be governed by their parent company’s board, especially when they are wholly owned by the parent. This creates a unique governance challenge: dividing authority between parent board and management and (if there is one) the subsidiary board and management. This Director Essentials provides leading practices on how to navigate this complex governing relationship and how to watch out for warning signs that governance is no longer working.

Key Takeaways

• Boards of both parents and subsidiaries should proactively define subsidiary governance—including authority, structure, and composition—rather than let it evolve by default.
• Subsidiary directors should engage actively, using local insight to inform—and when needed, challenge—parent assumptions. 
• Authority boundaries shift as the business grows, requiring periodic review alongside informal, ongoing coordination.