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BackThe action plan on corporate governance continues the current course. Current company rules shall be modernised. The Commission focuses on enhanced transparency, greater engagement by shareholders and the promotion of cross-border operations. Individual points of the action plan are going in the right direction. Nevertheless, the rights of employees are being short-changed.
On Wednesday, the European Commission presented an action plan on corporate governance. Corporate governance “determines the way companies are managed and controlled”. Hence, corporate governance concerns the relationship between a company’s management, its supervisory board, its shareholders and “other interest groups”.
According to the European Commission, the financial crisis has revealed that “significant weaknesses in corporate governance of financial institutions played a role in the crisis”. Nevertheless, the new action plan also covers companies outside the financial sector. The package includes legislative proposals but also non-binding provisions, which are flexible for both shareholders and companies. The Commission wants to modernise and improve the existing law framework. The action plan aims at enhancing transparency, legal certainty and control of operations. Online consultations and public hearings took place prior to developing the new company law and corporate governance framework. Various stakeholders were invited to present their proposals.
Three corner stones of the action plans
On the one hand corporate transparency shall be made easier. Shareholders must receive better information on their company’s corporate governance; the quality of corporate governance reporting shall therefore be improved. Apart from that, the company’s policy on promoting diversity has to be disclosed. Here the European Commission would like to see an improvement in respect to age, nationality and gender balance among non-executive directors. The second cornerstone concerns the encouragement of shareholder engagement with regard to companies’ corporate governance. Shareholders will have the opportunity of exercising oversight of the company. At the same time, share ownership schemes shall motivate employees to buy their company’s shares. Finally, cross-border operations shall be promoted and made easier. Here, the European Commission sees it as its responsibility to strengthen companies’ growth and competitiveness.
Commission first and foremost protects companies
Promoting greater diversity among corporate board members is without a doubt a welcome initiative. It is of little surprise that these intentions are flexible guidelines, which are not legally binding. Another aspect appearing in the Commission’s action plan is employee participation. Employees may assume consulting functions, participate in the board or become shareholders. The Commission intends to analyse which obstacles might exist in individual Member States in respect of employee participation.
Additional links:
Press release of the European Commission
MEMO Action plan on corporate governance
Action plan on corporate governance
According to the European Commission, the financial crisis has revealed that “significant weaknesses in corporate governance of financial institutions played a role in the crisis”. Nevertheless, the new action plan also covers companies outside the financial sector. The package includes legislative proposals but also non-binding provisions, which are flexible for both shareholders and companies. The Commission wants to modernise and improve the existing law framework. The action plan aims at enhancing transparency, legal certainty and control of operations. Online consultations and public hearings took place prior to developing the new company law and corporate governance framework. Various stakeholders were invited to present their proposals.
Three corner stones of the action plans
On the one hand corporate transparency shall be made easier. Shareholders must receive better information on their company’s corporate governance; the quality of corporate governance reporting shall therefore be improved. Apart from that, the company’s policy on promoting diversity has to be disclosed. Here the European Commission would like to see an improvement in respect to age, nationality and gender balance among non-executive directors. The second cornerstone concerns the encouragement of shareholder engagement with regard to companies’ corporate governance. Shareholders will have the opportunity of exercising oversight of the company. At the same time, share ownership schemes shall motivate employees to buy their company’s shares. Finally, cross-border operations shall be promoted and made easier. Here, the European Commission sees it as its responsibility to strengthen companies’ growth and competitiveness.
Commission first and foremost protects companies
Promoting greater diversity among corporate board members is without a doubt a welcome initiative. It is of little surprise that these intentions are flexible guidelines, which are not legally binding. Another aspect appearing in the Commission’s action plan is employee participation. Employees may assume consulting functions, participate in the board or become shareholders. The Commission intends to analyse which obstacles might exist in individual Member States in respect of employee participation.
Additional links:
Press release of the European Commission
MEMO Action plan on corporate governance
Action plan on corporate governance