McCreevy Updates EU Corporate Governance Plan and Wants Consistent IFRS

Recently, EU Commissioner for the Internal Market Charlie McCreevy gave an update of the progress made on the corporate governance action plan. Essentially, the first phase of the plan has been completed and the Commission is consulting with stakeholders before embarking on the second phase. The commissioner mentioned that there is a growing consensus that issues surrounding shareholder democracy should be addressed, including one share, one vote. The EC has launched a study on the deviation from proportionality principle across member states, with results to be published next Spring and a possible recommendation in the offing. Based on the consultations on this issue and others, the commissioner said he will soon be making a more detailed statement of coming priorities. He also noted it is crucial to get the balance right in the area of corporate governance.

On a separate issue, the commissioner reiterated a grave concern of his, and others, that international financial reporting standards (IFRS) be consistently interpreted. I have previously blogged about the strong concerns shared by a number of regulators that the inconsistent interpretation of IFRS by different nations would doom the convergence of financial accounting standards. Commissioner McCreevy is placing great trust in the Committee of European Securities Regulators CESR) to play a leading role in assuring consistent interpretations. In this regard, CESR has created several working groups and will create a public database of enforcement decisions. The commissioner also urged accountants and auditors to help attain consistent interpretations by improving communications among themselves. Finally, he pledged that the Commission will also play an active role by providing a roundtable for discussion by interested parties, with issues of widespread significance referred to the IASB’s interpretative arm. But he said that the Commission will not itself provide European interpretations or guidance.