The European Commission’s Internal Markets Commissioner Michel Barnier has rejected the idea of voluntary codes as the sole way of improving corporate governance, potentially putting European Union policymakers on a collision course with the alternative ‘comply or explain’ model.
With the European Union’s Green Paper on Corporate Governance due at some point next year, the stage is set for a wrangle between the EU’s top-down style and the voluntary approach favoured by the likes of the UK, in its codes on Corporate Goverance and Stewardship.
Referring to a series of measures up for debate, Barnier stated: “I am clear we will not be able to rely only on voluntary codes.” He said that, in future, rules will need to be “clearer and more specific”.
The UK’s financial regulatory establishment is determined to retain its corporate governance system and is vigorously lobbying Brussels.The Financial Reporting Council’s Chief Executive Stephen Haddrill, for example, has said he would “defend to the death” the comply or explain principle.
“We have spoken for years about shareholders rights,” Barnier said in a speech last night in Brussels. “It is time to also talk about shareholders’ obligations.”
He said the proposals on the table include limiting the number of directors’ memberships in boards, more boardroom diversity and the Capital Requirements Directive.
Barnier said they would lead to better corporate governance in companies, to more responsibility and more accountability.
Barnier argued a lack of effective regulation and supervision was at the heart of the financial crisis. “We must move away from the short-term, hit-and-run culture that has caused so much damage,” he added.