Corporate governance framework for European companies: what needs to be improved?

Tuesday, April 12, 2011 | Posted by: Fiona Cullinan
Categories: Governance | Tags: governance, Board, Corporate Governance, Simon Lowe, women, gender, UK Corporate Governance Code, diversity, Europe, guidance, comply or explain, debate

Last week the European Commission launched a public consultation into European corporate governance, its effectiveness and possible ways forward. On the discussion agenda are board effectiveness, gender diversity, short-termism and the failure of self-regulation prior to the economic crisis. Read on to join the debate.

The initiative begins with a Green Paper discussion document, which aims to launch a general debate on a number of issues including diversity in boards, shareholder engagement and the quality of corporate governance statements

One of the lessons of the crisis is that corporate governance, until now usually based on self-regulation, was not as effective as it could have been. For example, shareholders did not hold boards to account as one might have expected it. Directors failed in their supervisory functions. In addition, a higher convergence of corporate governance rules across the EU could facilitate companies’ activities cross-border and reduce compliance costs.

Simon Lowe, Chairman, The Grant Thornton Governance Institute, added:

“The governance debate heats up as the European Commission issues its Green Paper on the future of governance practice. At its heart is the contentious issue of whether a shift away from ‘comply or explain’ towards greater prescription would have prevented the failures of the recent financial crisis.”

The deadline for responses will be 22 July 2011 with follow-up measures adopted in 2012. Download the Green Paper or read the FAQs on the consultation.

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