The European Commission (EC) is now expected to deliver its long awaited package of corporate governance and CSR proposals in December, after pushing back its initial plans to issue new directives this month. Sources in Brussels said that the reforms had been delayed because of the EU’s internal verification process, but that the Commission was aiming for a December release. Institutional investors are closely following a number of regulatory developments on corporate governance and CSR/corporate reporting that are being co-ordinated as part of the latest EU Action Plan. On corporate governance, the EU has been examining whether the current comply-or-explain regime for corporate governance in Europe should be more rules based. Many responses to the EC’s green paper last year said a requirement for companies departing from corporate governance codes to provide more detailed and meaningful explanations would suffice.
Link to RI article on Green Paper responses
Various country regulators including The UK’s Financial Reporting Council and trade bodies such as the European Fund and Asset Management Association (EFAMA) are understood to have been lobbying the EU firmly for something akin to the UK Stewardship Code, EFAMA’s own code or a similar Dutch version used by Eumedion, the country’s investor corporate governance club, to be the cornerstone of EU investor-based corporate governance oversight. However, Michel Barnier, EU Commissioner for Internal Market and Services, has suggested that such voluntary governance regimes may lack teeth.Another major corporate governance issue that will feed into the EU Action Plan is the consultation launched by the Paris-based European Securities Market Authority (ESMA) on the role of proxy advisors.
ESMA’s consultation on a 40-page document called An Overview of the Proxy Advisory Industry, Considerations on Possible Policy Options, was concluded in June this year and a feedback statement is expected to be published shortly. ESMA’s findings will be fed directly into the EU Action Plan because the organisation does not itself have regulatory power.
Link to RI article on ESMA consultation
The corporate governance proposals will come out at the same time as recommendations on corporate CSR/ESG reporting.
Speaking at RI’s ESG Europe conference in Amsterdam earlier this month, Nicolas Bernier Abad, Policy Officer, DG Internal Market and Services at the European Commission, part of the group working on CSR reporting, said the EU wanted to dispel some of the “myths” around regulation on corporate reporting: “Companies need to provide a ‘whole’ view of their position, that’s the way we’re approaching this,” he said. He suggested that narrative reporting by companies around social and environmental issues was being examined closely by the Commission.
Once adopted, an EU Action Plan then requires further legislative proposals from EU Member States with a text then sent back to the EU for further negotiations. The recommendations made by an Action Plan are legally optional for Member States, but are broadly picked up and introduced into Member State regulation.