Parliament stresses flexibility and transparency
By Sophie Mosca | Thursday 29 March 2012
Although the European Parliament welcomes the Commission’s April 2011 green paper on corporate governance, it regrets that certain subjects are missing from it, such as decision making in boards of directors, the liability and independence of directors and conflicts of interest. The resolution, adopted on 29 March (311 to 250 and 44 abstentions), stresses the need for more transparency and for companies to take into account social, ethical and environmental concerns in their practices.
Based on a report by Sebastian Bodu (EPP, Romania), MEPs state the need for a common set of rules on relations between shareholders, directors and managers for all listed companies, while taking account of the flexibility needed by small structures and provisions specific to certain member states. These provisions must go hand in hand with those suggested for corporate social responsibility to strengthen ties between enterprises and the social environment in which they operate.
MEPs call for a clear separation between the offices of board chairman and chief executive officer, at least for large companies, and for a better balance in boards of individuals with a mix of skills, experience and backgrounds. They propose to introduce quotas for women’s presence and suggest that remuneration policy should be subject to approval by the general meeting of shareholders and published in the company’s annual report, while giving states the possibility to take transparency further and to set rules on the publication of the individual remuneration of executive and non-executive directors. To prevent abuse, they recommend closer surveillance and new rules on salaries, bonuses and remuneration of executives of companies in the financial sector, whether or not they have been bailed out by a member state government.
Parliament also wishes to encourage shareholders’ participation in the company. They should be given more information and there should be full transparency of voting for any borrowed shares. It calls for incentives for shareholders to adopt a long-term investment approach and for safety nets to prevent conflicts of interest, in particular stricter rules for voting advisers whose activity is subject to caution. Rather than binding EU rules, the EP would prefer a national code of conduct with which companies would have to “comply or explain”.
MEPs call for a clear separation between the offices of board chairman and chief executive officer, at least for large companies