Transcript The European Commission's Policy on Corporate Governance

The European Commission’s
Policy on Corporate
Governance
Corinna Ullrich, DG MARKT, EU Commission
Summit for the future,
Amsterdam, 4 May 2006
1
Corporate governance in the EU
• Main responsibility for corporate
governance questions with DG Internal
Market
• Focus on relationship between the organs
of the company and between the company
and its shareholders/(potential) investors
• Other aspects dealt with by other
Commission services (in particular DG
Employment)
2
Key corporate relationships
Appoints/removes
Controls
Approves
Board
ACCOUNTABLE
CEO
Reports
Submits
Appoint board
Approve accounts
A
C
C
O
U
N
T
A
B
L
E
Manages company
in shareholders interests
Shareholders
3
Development since 1998
•
1998 Commission communication: ‘Financial Services: building a framework
for action’:
– No single CG model but emerging consensus on common principles:
• equitable treatment of shareholders
• transparency and accountability of the corporate process
•
1999 Financial Services Action Plan
– EU involvement in this area confined to reviewing existing national CG so
as to identify legal or administrative barriers which could frustrate the
development of a single EU financial market.
•
2002 Weil, Gotshal, Manges comparative study of CG codes (35 national,
OECD, ICGN, 2 EU)
– Strong similarities amongst CG codes  convergence factor
– No obstacle to investment

No need for an EU CG code

Need to lower barriers to shareholder participation and
information (i.e., facilitate cross-border voting and enable
shareholders to evaluate the governance of corporations)
4
Winter Report (11/2002)
• High level group of 7 company law experts chaired by
Jaap Winter, set up by Commission in 2001 to issue
recommendations on the modernisation of the EU
company law framework
• Corporate scandals  Mandate extended in 2002 to
cover additional CG issues
• Winter Report conclusions with regard to CG
– Disclosure mechanisms are central to any sound CG
– Shareholders have a watchdog role to play
– Independent non-executive directors are an important safeguard
and should monitor areas where conflicts of interest can arise
– Remuneration of management is a key area of conflicts of
interests, where independent directors should therefore play a
leading role
– No need for EU CG code, but EU should co-ordinate efforts of
MS
5
Commission Action Plan (05/2003)
• Action plan on modernising company law and
enhancing corporate governance
• Policy objectives:
– Protection of shareholders and third parties/
fostering of investors’ confidence
– Foster competitiveness of EU businesses
• Key CG lines of action
–
–
–
–
Enhance disclosure
Modernise the board of directors
Co-ordinate Member States’ CG efforts
Strengthen shareholders’ rights, notably in a cross-border
context
• CG measures targeted to listed companies
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Short term measures of the Action
plan (2003-2006)
•
Enhance disclosure
–
•
Directive amending the 4th and 7th company law directives
(corporate governance statement, related party transactions and offbalance sheet agreements) – agreement 12/2005, official adoption
and publication imminent
Modernise the board of directors
–
–
–
•
Recommendation on the remuneration of directors – Adopted
12/2004
Recommendation on the role on independent non-executive directors
– Adopted 02/2005
Directive amending the 4th and 7th company law directives
(responsibility of board members)
Co-ordinate Member States’ CG efforts
–
•
Creation of the European Corporate Governance Forum – 10/2004
Strengthen shareholders’ rights, notably in a cross-border context
–
Proposal for a directive on shareholders’ rights - 01/2006
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Consultation on mid- and long term
measures of the Action plan
• Starting point:
– Situation in the „outside“ world has changed since
2003
– Also general policy approach changed: Lisbon
agenda (focus on boosting competitiveness of
companies)
• Public consultation launched in December 2005
(deadline end of March)
– „Better Regulation“
– over 260 written replies
• Public hearing on 3 May
8
Consultation on mid- and long term
measures of the Actionplan
First impression: Whereas stronger support for
certain actions in Company Law on many
Corporate Governance issues views more or
less evenly split
• on one hand „regulatory fatigue“/requests for a
phase of digestion
• on the other hand need for certain additional
action is recognised, e.g.
• shareholders‘ rights,
• disclosure of voting policies of institutional investors,
• porportionality of ownership and control
9
Consultation on mid- and long term
measures of the Action plan
• Summary report on written contributions
and hearing
• To be published in the coming weeks (and
in any case before the summer)
• Then decision on what follow-up should be
(automn 2006)
10
Questions?
11