The Commission also endorsed
the two-tier board system extant in many EU member states, while at the same
time urging non-executive supervisory boards to give broader consideration to
the entire range of risks faced by
their company. In the Commission’s view,
the effective oversight of the executive directors or the management board by
the non-executive directors or supervisory board leads to successful governance
of the company. It follows that diversity of gender, competences and views
among the board’s members is very important because it facilitates an understanding
of corporate operations and thus enables the board to challenge the management
decisions objectively and constructively. Thus, in 2013, the Commission will propose
strengthening disclosure requirements with regard to board diversity policies
and risk management through an amendment of the Accounting Directive
The 2011 Green Paper
identified the need for an EU mechanism to help companies identify their
shareholders in order to facilitate dialogue between the company and its
shareholders on corporate governance issues. Thus, the Commission will propose,
in 2013, an initiative to improve the visibility of shareholdings in the EU as
part of its legislative work program in the field of securities law. The
Commission will also consider an initiative in 2013, possibly in the context of
the revision of the Shareholder Rights Directive, with a view to improving the
transparency and conflict of interest frameworks applicable to proxy advisory
services, which have become de facto corporate governance standards setters.
In 2013, the Commission will
also begin an initiative, possibly through modification of the Shareholders Rights
Directive, on the disclosure of voting and engagement policies as well as
voting records by institutional investors. The Commission believes that the disclosure
of such information could have a positive impact on investor awareness, optimize
investment decisions, facilitate dialogue between investors and companies,
encourage shareholder engagement and strengthen companies’ accountability to
civil society. The Commission noted that, currently, the UK Stewardship Code
and the Dutch Eumedion best practices for engaged share ownership recommend that
institutional investors be transparent about the way they exercise their
ownership responsibilities, which includes in particular information about
voting and engagement.
Another 2013 initiative through
a modification of the Shareholders Rights Directive would be to improve
transparency on remuneration policies and individual remuneration of directors,
as well as to grant shareholders the right to vote on remuneration policy and
the remuneration report. In the Commission’s view, shareholders should be able
to express their views on the matter through a mandatory shareholder vote on the
company’s remuneration policy and the remuneration report, providing an
overview of the manner in which the remuneration policy has been implemented. Currently, not all EU member
states give shareholders the right to vote on remuneration policy and/or the report,
and information disclosed by companies in different states is not easily
comparable.
The Commission will also propose
in 2013 an initiative aimed at improving shareholder control over related party
transactions, possibly through an amendment to the Shareholder Rights
Directive. Related party transactions may cause prejudice to the company and
its minority shareholders, noted the Commission, since they give the related
party the opportunity to appropriate value belonging to the company. Thus, adequate
safeguards for the protection of shareholder interests are of
great importance.
Current EU regulations require
companies to include in their annual reports a note on transactions entered
into with related parties, stating the amount and the nature of the transaction
and other necessary information. However, since this requirement tends to be
regarded as insufficient, the European Corporate Governance Forum issued a
statement on related party transactions recommending the introduction of common
principles across Europe . The Forum proposed
in particular that transactions above a certain threshold should be subject to
evaluation by an independent advisor and that the most substantial transactions
should be approved by shareholders.