Brussels launches 'model for the rest of the world'

Brussels, 10 June 2003

The executive of the European Union is proposing to member states a new set of rules which Commissioner Frits Bolkestein says will strengthen European corporate governance and “provide a model for the rest of the world".

Billed as an Action Plan on Modernising Company Law and Enhancing Corporate Governance in the EU the Commission proposes a mixture of legislation and voluntary agreements:

• Independent directors would supervise executive pay and audits, with minimum standards imposed for nomination, remuneration and audit committees.
• Listed companies would have to publish a corporate governance audit within their annual report.
• Detailed disclosure of directors' pay and other rewards.
• The appointment of a new breed of national regulator, who would be a member of a pan-European coordinating group.
• Shareholders' rights strengthened by new laws, which would allow them to participate in meetings via the Internet, and to attend, ask questions, table resolutions and vote at meetings.

Other corporate governance initiatives proposed in the Action Plan cover: achieving better information on the role played by institutional investors in corporate governance; giving further effect to the principle of proportionality between capital and control; offering to listed companies the choice between the one-tier and two-tier board structures; and enhancing directors' responsibilities for financial and key non-financial statements.

The Action Plan notes that there is a strong medium to long term case for aiming to establish a real shareholder democracy and that the Commission intends to undertake a study on the consequences of such an approach.

Mr Bolkestein, who is the Commissioner for the Internal Market, rejected suggestions that Europe should adopt US corporate governance rules.

“Enron, WorldCom, HealthSouth and Ahold are part of a hall of shame,' Mr Bolkestein said. “These propos als are a European solution... We shall regulate our own business."

The commissioner said he hoped the Council of Ministers would take action this year or in early 2004. “"Company law and corporate governance are right at the heart of the political agenda, on both sides of the Atlantic. That's because economies only work if companies are run efficiently and transparently. We have seen vividly what happens if they are not: investment and jobs will be lost; and in the worst cases, of which there are too many, shareholders, employees, creditors and the public are ripped off. Prompt action is needed to ensure sustainable public confidence in financial markets"

For the full text of the Commission's Action Plan click here