EU issues resumé of responses to corporate governance green paper

Document indicates thinking of industry respondents on the main reform questions.

The European Commission has published its resumé of responses to its green paper on corporate governance, which give some indication on how its thinking could be influenced before it legislates next year. The consultation for the green paper – the Commission’s response to criticism of a lack of shareholder oversight as one of the factors in the financial crisis – closed on July 22. It received 409 responses. The major themes of April 2011’s green paper included shareholder responsibility, asset owner/manager relationships, investor co-operation on engagement, a focus on proxy voting advisors, scrutiny of ‘comply or explain’ rules on corporate practices, shareholder voting on pay, and gender diversity. The feedback statement does not announce any EU policy options but it does outline the majority thinking of industry respondents. A principal issue in the green paper has been whether the comply-or-explain regime for corporate governance in Europe should be more rules based. Most responses to the green paper said a requirement for companies departing from corporate governance codes to
provide more detailed and meaningful explanations would suffice.The Commission said several respondents indicated that the Swedish model requiring a specific annual report on non-compliance could be an adequate solution to tackle “comply or explain” shortcomings. The majority of respondents to the paper were also against the creation of different corporate governance regimes based on company size. Other issues on which a majority view was noted included mandatory disclosure of company remuneration policies and individual pay of directors. Respondents were also widely supportive of the idea of a European mechanism to help issuers identify their shareholders in order to facilitate dialogue on corporate governance issues. A majority also favour requiring proxy advisors to be more transparent about their analysis, voting policies, potential conflicts of interest and their contact with companies ahead of AGM voting recommendations. Views were more evenly divided, however, on whether the EU should legislate to split Chair and CEO functions within companies and demand sufficient board diversity.
Link to green paper responses