2013年-CEPS欧洲政策研究中心_Reform_of_Corporate_Governance_in_the_EU_22页_1mb

Summary of "REFORM OF CORPORATE GOVERNANCE IN THE EU"

Core Content

This policy brief critiques the European Commission's recent proposals for mandating compliance with a local corporate governance code and setting minimum criteria for these codes. The authors argue that the Commission's approach is reactive and not aligned with the EU's existing strengths in corporate governance. Instead of pursuing harmonisation, they suggest that the EU should leverage its diversity and the effectiveness of its current governance practices.

Main Views

• The Commission's Approach is Reactive: The European Commission's 2003 Communications on corporate governance and statutory audit were largely a reaction to the US corporate scandals, particularly Enron and the Sarbanes-Oxley Act, rather than a proactive effort to build a unified European corporate governance framework.

• EU's Governance Model is Superior: The authors claim that the basic principles of corporate governance are better implemented in the EU than in the US, particularly due to the bank-based financial system and the use of differentiated voting rights, which help to balance control and liquidity.

• Harmonisation is Not Effective: The Commission's push for harmonisation has been ineffective in addressing the unique characteristics of the EU's corporate governance structures. The authors argue that the EU's diverse systems are more resilient and should not be homogenised to fit a US model.

• The HLG Report II is Misguided: The High Level Group (HLG) Report II, which influenced the Commission's proposals, is criticized for promoting a US-style shareholder democracy model that does not align with the EU's realities. The report's recommendations are seen as misaligned with the EU's concentrated ownership structures and may not be effective in improving governance.

Key Information

EU Corporate Governance Characteristics

• The EU operates under a bank-based financial system, which is different from the US's market-based system.
• Concentrated ownership is more common in the EU, with a higher percentage of companies under majority control.
• Differentiated voting rights are widely used in the EU to separate voting rights from cash flow rights, ensuring that control does not necessarily equate to financial power.
• Shareholder passivity is a feature of the EU system, with limited shareholder involvement in day-to-day management.

US Corporate Governance Characteristics

• The US has a market-based system, which is associated with higher executive pay and more reliance on shareholder democracy.
• Executive remuneration in the US has increased significantly, with a sharp rise in share and share-related compensation.
• The one-share/one-vote rule is dominant in the US, but the authors argue that this may not be optimal for the EU.

Commission's Proposals

• The European Commission proposed 20 legislative reforms and numerous recommendations for corporate governance.
• These proposals were seen as a response to the US corporate scandals and aimed to rebuild investor confidence and enhance competitiveness.
• The Commission emphasized harmonisation and statutory audit improvements, but the authors believe this is not necessary and may be counterproductive.

The Role of Market Integration and Subsidiarity

• The EU has historically avoided intervention in corporate governance, relying on subsidiarity and national codes.
• The Commission's new stance is seen as a shift in policy driven by external pressures rather than internal need.
• The principle of proportionality is suggested as a better approach than the one-share/one-vote model, as it aligns with the EU's financial structure.

Key Figures and Tables

Table 1: Layers of Securities Market Regulation

Table 2: CEO Remuneration in the EU in Multiples of Manufacturing Workers' Pay (1992-2000)

Table 3: Differentiated Voting Rights in Europe

Figures

• Figure 1: Average pay of top US 100 CEOs in multiples of worker pay. The ratio peaked at 1,046 in 1999 and declined to 531 and 411 in 2000 and 2001 respectively.
• Figure 2: Composition of average pay of top US 100 CEOs. The percentage of fixed compensation dropped from 43% to 17%, while the share and share-related component increased from 56% to 83%.
• Figure 3: Ownership structure in the EU vs. the US (percentage of listed companies under majority control). The EU has a much higher proportion (68% in Austria) than the US (1.7% on NYSE).
• Figure 4: Ownership structure in the EU vs. the US (percentage of companies with a blocking minority of at least 25%). The EU has a higher proportion (93.6% in Belgium) than the US (5.2%).

Conclusions

• The authors conclude that the EU has a more effective and better-implemented corporate governance system than the US.
• They argue that the Commission's proposals are based on a misunderstanding of the EU's financial and governance structure.
• Instead of harmonisation, the EU should continue to allow for diversity and market-driven convergence.
• The European Company Statute (SE) is a potential tool for simplifying corporate structures across the EU, but it is not a substitute for a European governance code.
• The HLG Report II and the Commission's Communications are seen as misaligned with the EU's governance model and may not achieve the intended goals of enhancing efficiency and investor confidence.