Thursday, 13 December 2012

Europe: the Commission's action plan for company law and corporate governance

The European Commission published its company law and corporate governance action plan yesterday: see here (pdf). Nothing revolutionary in approach is proposed: national corporate governance codes, and the dominant 'comply or explain' approach, will remain. There are, instead, proposals within three broad areas which build on the current framework: increased transparency; more shareholder engagement; and exploring ways to support economic growth particularly in the cross-border context. Amongst the Commission's proposals are the following:
  • Increase disclosure of board diversity policy and of risk management arrangements.
  • Improve the visibility of shareholdings in listed companies in Europe.
  • Improve the quality of corporate governance reports (in particular the quality of explanations provided by companies departing from corporate governance code provisions).
  • Disclosure of voting and engagement policies as well as voting records by institutional investors.
  • Improving transparency on remuneration policies and individual remuneration of directors, and granting shareholders the right to vote on the remuneration policy.
  • Improve shareholder control over related party transactions.
  • Improve the transparency and the conflict of interest frameworks applicable to proxy advisors.
  • Work closely with competent national authorities and the European Securities and Markets Authority to develop guidance to increase legal certainty as regards the relationship between investor cooperation on corporate governance issues and the rules on acting in concert.
  • Increase awareness of the European Company (SE) Statute (including employees' involvement) and possibly of the European Cooperative (SCE) Statute.
  • Identify obstacles to employee share ownership in Member States.
  • Further investigate the rules on the cross-border transfer of a company's registered office.
  • Revise the rules on cross-border mergers.
  • Investigate further rules on cross-border divisions.
  • Codify the major company law Directives.
  • Improve the information available on groups and recognition of the concept of ‘group interest’.

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