Europe: corporate governance in financial institutions - responses to Commission green paper

The European Commission has published a general summary of the responses received in respect of its consultation on corporate governance in financial institutions: see here (pdf). Summaries are provided for each question in the consultation. For example, with regard to the question whether there should be a limit on the number of boards on which a director may sit, the Commission notes:

Whilst almost all respondents that provided an answer to this question agree that directors should commit sufficient time to their duties, a large majority consider a general rule on limitation of the number of boards on which a director may sit as inappropriate. The main reason for this being that such a limitation would be too arbitrary and inflexible, and would not allow to take account of the situation of each particular financial institution and individual circumstances of each director. Moreover, such a limitation would not in fact guarantee that director will dedicate enough time for his position.

The majority of respondents suggested the following alternatives:

Instead of a strict limitation of the number of mandates, there should be a general principle that directors devote sufficient time to their duties in a financial institution. The implementation of this general principle by financial institutions should be subject to monitoring by shareholders and supervisory authorities. A limitation of mandates may be envisaged as best practice with a "comply or explain" approach.

The expected time commitment should be defined in a letter of appointment for each director. All mandates held by each individual director should be publicly disclosed".