Corporate Governance approved in the European Parliament (rapporteur Sebastian Bodu)

This report, yet a non-legislative one, contains questions of a crucial importance of how the future of the corporations will look like. This being said, such measures should not be applicable to non-public corporations. Corporate governance rules are, naturally, necessary to regulate the relationship between shareholders, directors and managers. If the number of shareholders is not large, irrespective of their size or business, there is no need for corporate governance. Moreover, such rules are not appropriate for SMEs, where flexibility of the governance is of the essence.

So, the key points of this report, as well as of the future corporate governance legislation, should strengthen the ties with the company of both non-executive directors, and its shareholders. In this respect, a clear demarcation line should be drawn between the attributions of the chairman of the Board of Directors and the Chief Executive Officer. More than this, the non-executive directors should have a professional background and expertise (i.e. former executives in other companies, from the same industry or from another, or from the same market or from another). Such qualifications are necessary because the board is the one who selects the officers and furthermore, watch over their activity, in order to report to the shareholders and supervisors. To properly perform this, they should be trained and skilled. Moreover, the number of the seats that one director can hold should be limited, excepting the situations were companies where the director sits are members of the same group, or the director is performing this participation as a representative of an institutional investor, where he holds its main job (so the participation is part of his/her job description). The composition of the board should be also more diverse and the role of non-residents (for the multinational companies) and of, course, women should be increased.

In order to increase the appetite of the shareholders to participate to the decision within the company, even if their investment is just for a short time period, they should more be involved. Electronic vote could be a solution, and the Commission should evaluate this possibility based on a cost-benefits ratio. Shareholders should receive the same amount of information from the company, irrespective of their stake. Cooperation between shareholders should also be allowed (in some Member States this is forbidden when it comes to the vote) and the conflict of interests between the shareholders and the company (i.e. transactions with related parties) should lead to a refrain in the vote from the interested shareholder, irrespective of its stake. The minority shareholders should be protected against the abusive decisions of the dominant one, but without giving the opportunity to allow the first a harassing behaviour.

Risk behaviour should be approved by the BoD and publicly disclosed, and the bonuses of the officers should be linked more to the long term results, in order to discourage a risky behaviour that endangers the company in the long run. Also, the remuneration policy of both the directors and the officers should be approved by the GMS. The report aims also to strengthen the role of the committees (audit, nomination, remuneration).

The key issue of this report will be mandatory norms or comply or explain principle, and I am glad that the EPP point of view in favour of the latest prevailed after the vote in the Legal Affairs Committee. The last but not least, all such measures to be introduced should consider the costs of any measure, based on a cost/benefit analysis (i.e. a periodic mandatory external appraisal).

The Commission should come up then with a set of tools contained in a European Code of Conduct, which will lean the main corporate governance instruments to be applied by the public corporations, customized in certain matters in accordance to the policy of each Member State.
The final goal of the future legislative report that is yet to come later this year is to preserve the strength of our corporations and make them important global actors, protecting the competitively and, as a consequence, secure jobs and profits.


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