A principle-based approach to Compliance adopted by the EU, will provide the basis to give Member States and companies the flexibility they need in running their operations efficiently.
The 'comply-or-explain' principle obliges companies to justify deviations from corporate governance codes they apply to them.
Shareholders' rights: the important role of the shareholder in the context of good corporate governance has to be emphasised. An appropriate balance has to be found between managerial entrepreneurship and shareholder control. This implies that a broad analysis be carried out on possible key powers of shareholders (such as their role in the nomination and dismissal of directors), the specific effects of large blocks of shareholders in one company and on the limits of the one share one vote concept. It considered the facilitation of the cross-border exercise of shareholders' voting rights as a crucial condition for rendering control by shareholders effective. For further information review the EU Commissions consultation paper on the enhancement of shareholders' rights. (IP/05/561).
Risk management in the EU: The aim is to ensure that companies manage their risks efficiently and safeguard shareholders' investments. The increase in disclosure requirements and the requirement to establish audit committees are introduced by the modifications of the 4th , 7th and the 8th Company Law Directives. The absence of major financial scandals in the coming years will enable the legislative bodies to capture careful examination of the lessons learnt from experience and how to strike the balance between the benefits of additional requirements and the costs and burdens that would result from these for EU companies.
Source: European Corporate Governance Forum