McCreevy Outlines EU's Future Corporate Governance Priorities

by Ulrika Lomas, for LawAndTax-News.com, Brussels

16 November 2005

Speaking on Monday at the European Corporate Governance Conference, Internal Market Commissioner Charlie McCreevy examined the progress made so far in the implementation of the Company Law Action Plan, and outlined the EC's priorities for the future in the area of corporate governance.

He explained that:

"We are approaching the end of the first phase of the Action Plan. The timing is perfect to start a reflection on what should be done in the second phase. That is why the Commission will launch, in the next few weeks, a wide-ranging public consultation. This Conference is the first step in that consultation. We already want to hear your views today. I want to be able to benefit from the considerable expertise and collective wisdom of all those present. And I hope that you will take the time to follow up with detailed comments and suggestions in response to our consultation document. Once the consultation document is issued, there will be a three month period for comments. My door (and particularly that of my staff!), will be open even wider than usual during this period."

"I think it is fair to say that over the past two years, the short term priorities in the Action Plan have been successfully implemented. Priorities and timing have been respected. We are putting the finishing touches to a couple of the outstanding measures. For example, the modification of the accounting directives which I hope will be adopted by the end of the year. This will, amongst other things, allow stakeholders to get a clearer picture of a company’s corporate governance practices by requiring companies to disclose whether they follow a corporate governance code and where they depart from it. We are also finalising our initiative to facilitate the cross-border exercise of shareholders’ rights. Our objective is to try and get the plumbing right so cross-border voting can flow across borders. I intend to submit a draft directive to my colleagues in the Commission by the end of the year."

"However, the short term priority measures were fixed when we were in the business of enhancing investors’ confidence after the financial scandals at the beginning of the millennium. The priorities very much reflected this: improving the framework for EU audit, confirming the responsibility of the board for financial and key non-financial statements, more transparency on directors’ remuneration, strengthening the independence of directors etc."

"The context in which we will set our priorities for the second phase is very different. Restoring investor confidence is no longer the main driver. The impetus for what we do next at EU level must now be the tandem of: (1) improving the competitiveness of EU companies- the so-called Lisbon agenda; and (2) the EU’s push towards better regulation."

The Internal Market Commissioner then went on to add:

"Better Regulation is a very important part of trying to get the climate right for business....Alan Johnson said recently that the challenge would now be to put all these words into actions and this is what I want to focus on now: how can we walk the talk on Better Regulation in the field of the internal market policy and what does it mean for the Company Law Action Plan? In my view, it means four things."

"Firstly, it means consultation with stakeholders, about which I have already spoken."

"Secondly, it means only legislating at EU level when that is the best level at which to act and where legislation is the only answer. We need to opt for instruments that put the least burden on companies and leave them as much flexibility as possible. Therefore, we will prefer a recommendation to a directive where a recommendation is suited to achieve the aim pursued. We will look at the measures originally proposed to see if they are still appropriate. For example, whether a directive is really needed on disclosure for institutional investors or whether the market is already moving in the right direction."

"Thirdly, it means a comprehensive impact assessment for any new piece of legislation to be submitted to the Commission. This builds on what is now becoming standard practice. Thus, if the Commission adopts a proposal for a directive on shareholders’ rights, it will at the same time approve a detailed impact assessment that will properly assess the benefits and costs for the parties concerned. I believe that the impact assessment is an indispensable tool for improving the quality of our work."

"Fourthly, better regulation means we will be adding a new dimension to the consultation on the Action Plan. Three weeks ago the Commission adopted a three year rolling programme of measures to simplify existing EU law as one central element of our Better Regulation project. The existing Company Law Directives are part of this exercise."

"Company Law must be accessible and comprehensible. Moreover, most of European Company Law was designed from the late 1960s to the early 1990s. In the meantime markets have changed. So have the needs of companies and stakeholders. Our idea is to work on the adoption of a single legislative text which modernises and simplifies the company law directives by eliminating any dead wood together with any contradictory, overlapping and outdated provisions."

Recommended