Université d’Aix-Marseille - Institut de Recherches Europe-Asie LL.M. in European Business Law 2012/2013
Key Concepts of European Corporate Governance
Rangeena Siddiqi, Maythavee Buasomboon, Gao Nan and FU Guannan
Under the supervision of Professor Michala Meiselles
European corporate law has enjoyed a renaissance in the past decade. Fifteen years ago, this would have seemed most implausible. In the mid-1990s, the early integration strategy of seeking to harmonies substantive company law seemed to have been stalled by the need to reconcile fundamental differences in approaches to corporate governance. Little was happening, and the grand vision of the early pioneers appeared more dream than ambition. Yet since then, a combination of adventurous decisions by the Court of Justice, innovative approaches to legislation by the Commission, and disastrous crises in capital markets has produced a headlong rush of reform activity. The volume and pace of change has been such that few have had time to digest it: not least policymakers, with the consequence that the developments have not always been well coordinated. The recent 2007/08 financial crises have yet again thrown many - quite fundamental - issues into question. In this article, we offer overview of Key concepts of Corporate Governance in European countries based on EU law.
Corporate governance is traditionally defined as the system by which companies are directed and controlled 1 and as a set of relationships between a company’s management, its board, its shareholders and its other stakeholders 2 . The corporate governance framework for listed companies in the European Union is a combination of legislation and ‘soft law’, including recommendations 3 and corporate governance codes. While corporate governance codes are adopted at national level, Directive 2006/46/EC promotes their application by requiring that listed companies refer in their corporate governance statement to a code and that they report on their application of that code on a ‘comply or explain’4 basis. Supervisory Function: A supervisory board or supervisory committee, often called board of directors, is a group of individuals chosen by the stockholders of a company to promote their interests through the governance of the company and to hire and supervise the executive directors and CEO. Corporate governance varies between countries, especially regarding the board system. There are countries that have a one-tier board system (like the U.K.) and there are others that have a twotier board system like Germany. Boards of directors have a vital part to play in the development of responsible companies. And in many respects, the role played by the chairperson seems to have a considerable impact on the board’s functioning and success. Roles for NEDs: In 2007, the European Commission published a report on Member State implementation of Recommendation 2005/162/EC (the “Recommendation”). This Recommendation addresses the role of non-executive or supervisory directors of listed companies and that of the (supervisory) board’s committees. It was adopted to promote standards ensuring that the boards of listed companies offer sufficient guarantees of independence. In doing so, it promotes the convergence
Report of the Committee on the Financial Aspects of Corporate Governance (The Cadbury Report), 1992, p. 15, accessible at http://www.ecgi.org/codes/documents/cadbury.pdf. OECD Principles of Corporate Governance, 2004, p. 11, accessible at http://www.oecd.org/dataoecd/32/18/31557724.pdf. For a list of EU measures in the field of corporate governance, see Annexes. This approach means that a company choosing to depart from a corporate governance code has to explain which parts of the corporate governance code it has departed from and the reasons for doing so.
of the national corporate governance codes enacted in the Member States, so...