News
BackThis week, the European Commission started a public consultation on corporate governance. The aim of the Commission is to gather opinions as to how corporate governance, whose weaknesses became particularly apparent during the crisis, could be improved within the EU. Key issues of the consultation are the function and composition of the boards of directors, the orientation of shareholders, which is too short-term and the problems associated with it as well as the improvement of monitoring and enforcement of corporate governance codes. The Consultation will continue to the end of July 2011.
Proportion of women on boards of companies shall be increased
The EU Commission requests that the diversity boards of directors should be raised. On the one hand, the objective is to increase the proportion of women on boards of companies: currently half of all listed companies in Austria had no women on their board; only 4 % of all board members are female. The EU average lies at 12 %. The suggestion is to introduce a quota or - as a less far reaching alternative - the publication of a possibly existing diversity strategy of listed companies. On the other hand, it is also the aim to increase the international diversity of boards, as well as to include board members with a wider range of professional backgrounds. The question whether to introduce a recommendation for the maximum number of board positions to be held by any one person is also being considered.
Directors´ remuneration shall be disclosed
Another point, which the Commission addresses in its Green Paper, is risk management by directors and the remuneration of board members. The Commission recommends disclosing remuneration, involving shareholders more with regard to remuneration of the board members and that it should be oriented more towards long-term objectives. Another problem identified by the EU Commission is the only short-term interest of shareholders in companies. Both the activities and the role of shareholders shall become more transparent. The remuneration of proxy advisors is also only orientated towards short-term goals and there are often conflicts of interest by investors and proxy advisors. These problems shall also be addressed. Apart from that, both monitoring and the enforcement of corporate governance codes shall be strengthened.
The Commission leaves it open whether further legislative steps will be introduced when the consultation is complete. There appear to be large differences between the Member States and the companies of the Member States as to how far such a regulation should go. However, in particular in view of the very low share of women on the boards of directors it is high time to introduce legislative steps and to pursue the initiative.
Further information:
Press release: Corporate governance framework for European companies: what needs to be improved?
Frequently Asked Questions: Consultation on the EU corporate governance framework
Study by AK Vienna: Women in management and supervisory boards (German only)
The EU Commission requests that the diversity boards of directors should be raised. On the one hand, the objective is to increase the proportion of women on boards of companies: currently half of all listed companies in Austria had no women on their board; only 4 % of all board members are female. The EU average lies at 12 %. The suggestion is to introduce a quota or - as a less far reaching alternative - the publication of a possibly existing diversity strategy of listed companies. On the other hand, it is also the aim to increase the international diversity of boards, as well as to include board members with a wider range of professional backgrounds. The question whether to introduce a recommendation for the maximum number of board positions to be held by any one person is also being considered.
Directors´ remuneration shall be disclosed
Another point, which the Commission addresses in its Green Paper, is risk management by directors and the remuneration of board members. The Commission recommends disclosing remuneration, involving shareholders more with regard to remuneration of the board members and that it should be oriented more towards long-term objectives. Another problem identified by the EU Commission is the only short-term interest of shareholders in companies. Both the activities and the role of shareholders shall become more transparent. The remuneration of proxy advisors is also only orientated towards short-term goals and there are often conflicts of interest by investors and proxy advisors. These problems shall also be addressed. Apart from that, both monitoring and the enforcement of corporate governance codes shall be strengthened.
The Commission leaves it open whether further legislative steps will be introduced when the consultation is complete. There appear to be large differences between the Member States and the companies of the Member States as to how far such a regulation should go. However, in particular in view of the very low share of women on the boards of directors it is high time to introduce legislative steps and to pursue the initiative.
Further information:
Press release: Corporate governance framework for European companies: what needs to be improved?
Frequently Asked Questions: Consultation on the EU corporate governance framework
Study by AK Vienna: Women in management and supervisory boards (German only)