Corporate Governance Regulation - Papers

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European Commission Timeline, EU Corporate Governance Framework
Submission Date Comment Deadline Final Recommendations
April 5, 2011 July 22, 2011 Fall 2011
European Commission Timeline, EU Corporate Governance in Financial Institutions
Submission Date Comment Deadline Proposed Recommendations
June 2, 2010 Sept. 1, 2010 First Qtr 2011

Green papers, white papers, consultation papers, and additional documents addressing corporate governance in the European Union, U.S., and U.K.

The EU Corporate Governance Framework - April 5, 2011[edit]

April 5, 2011

The paper seeks guidance from the public and, specifically, guidance on 25 questions in three categories:

  • General questions on governance issues such as diversity, remuneration, and risk management policies;
  • Shareholder-specific questions addressing conflicts of interest and minority shareholder protection; and
  • Monitoring and implementation of corporate governance codes.

Of particular interest is the composition of advisory boards, and whether the addition of diversity and gender quotas "could stop inward-looking 'group think'."<ref>EU proposes giving investors say on manager pay. Reuters. Retrieved on April 5, 2011.</ref>

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Bank for International Settlements - The Governance of Financial Regulation:Reform Lessons fron the Recent Crisis - November 2010[edit]

November 2010

From the white paper:

"A systemic failure of financial regulation contributed to the crisis. The major financial regulatory agencies repeatedly designed, implemented, and maintained policies that increased the fragility of the financial system and the inefficient allocation of capital. The financial policy apparatus maintained these policies even as they learned that their policies were distorting the flow of credit toward questionable ends. They had plenty of time to assess the impact of their policies and adapt, but they frequently failed to change their policies. Thus, the institutions responsible for maintaining the safety and soundness of the global financial system made systematic mistakes. Thus, a comprehensively effective financial reform package must address the systemic failure of the governance of financial regulation – the system associated with evaluating, enacting, and implementing financial policies."

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Corporate Governance in Financial Institutions and Remuneration Policies - June 2, 2010[edit]

June 2, 2010

The paper addresses two aspects of the financial crisis of 2008:

  • Improving EU supervision of Credit Rating Agencies; and
  • Reforming corporate governance in financial institutions.

Under the proposed changes, the new European supervisory authority – the European Securities and Markets Authority – would be entrusted with exclusive supervision powers over CRAs registered in the EU. This would include also the European subsidiaries of well-known CRAs such as Fitch, Moody's and Standard & Poor's. It would have powers to request information, to launch investigations, and to perform on-site inspections. Issuers of structured finance instruments such as credit institutions, banks and investment firms will also have to provide all other interested CRAs with access to the information they give to their own CRA, in order to enable them to issue unsolicited ratings. <ref>Commission proposes improved EU supervision of Credit Rating Agencies and launches debate on corporate governance in financial institutions. Europa. Retrieved on August 17, 2011.</ref>

To improve corporate governance in the wake of the financial crisis, the Commission plans to address the following issues:

  • How to improve the functioning and the composition of boards of financial institutions in order to enhance their supervision of senior management;
  • How to establish a risk culture at all levels of a financial institution in order to ensure that long-term interests of the business are taken into account;
  • How to enhance the involvement of shareholders, financial supervisors and external auditors in corporate governance matters;
  • How to change remuneration policies in companies in order to discourage excessive risk taking.
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Financial Services Authority: Effective Corporate Governance - January 2010[edit]

January, 2010

From the paper:

"To support our current activity and change in approach, this CP necessarily comprises a relatively disparate range of proposals for consultation:

  • a new framework of classification of controlled functions (Chapter 2);
  • other changes to the approved persons regime, including the scope and definition of some controlled functions (Chapter 3);
  • some guidance on our expectations in relation to non-executive directors (NEDs) (Chapter 5); and
  • risk governance guidance and our plans for other implementing measures in support of Sir David Walker’s recommendations (Chapter 6).

"We are also taking the opportunity to provide more information on our Significant Influence Function (SIF) process (Chapter 4)."

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OECD: Corporate Governance and the Financial Crisis - 2009-2010[edit]

February, 2009

Conclusions from the paper:

  • The financial crisis can be to an important extent attributed to failures and weaknesses in corporate governance arrangements.
  • Corporate governance routines did not serve their purpose to safeguard against excessive risk taking in a number of financial services companies.
  • Accounting standards and regulatory requirements have also proved insufficient in some areas leading the relevant standard setters to undertake a review.
  • Remuneration systems have in a number of cases not been closely related to the strategy and risk appetite of the company and its longer term interests.

The paper provides a brief history of events leading to the crisis, and offers recommendations on executive compensation, risk management, corporate board makeup, and the use of credit ratings.

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References[edit]

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