Financial Times: Softly, softly on EU convergence, says lawyer: “Scandals such as those at Parmalat, the Italian dairy company that collapsed under €14bn ($19bn) of debt, Ahold, the Dutch retailer, and Royal Dutch/Shell's reserves debacle have given reforms fresh impetus.” (ShellNews.net) 27 Dec 04
By Brian Groom and Ian Bickerton in Amsterdam
Published: December 27 2004
The leading architect of European corporate governance reforms has warned against pushing cross-border convergence faster than the market dictates.
Jaap Winter, chairman of the high-level group of company law experts whose recommendations lie behind the European Commission's drive for better standards, said practices were changing "relatively fast". He added: "In all member states things are happening, codes are produced, legislation is changed, boards are starting to operate differently."
Scandals such as those at Parmalat, the Italian dairy company that collapsed under €14bn ($19bn) of debt, Ahold, the Dutch retailer, and Royal Dutch/Shell's reserves debacle have given reforms fresh impetus. Mr Winter, a Dutch lawyer, said there was a "sense of urgency that things must be transparent, that conflicts of interest must be dealt with, that non-executives have a real role to play".
He warned, however, that the objective should not be to force Europe's varied systems of finance, share ownership and governance to converge. "Convergence is OK where companies are operating under very similar circumstances. It should probably be stimulated - but we should be sensitive to differences that still exist and are relevant. I don't think we should start pushing for convergence in those areas."
Some companies fear the drift of reform will lead to an EU-wide set of corporate governance rules. Mr Winter argued that disclosure of governance structures should be mandatory.
The Commission proposes legislation to force companies to include a statement in annual reports saying what code of corporate governance applies, what parts they have chosen not to apply and reasons for doing so, and information on internal control and risk management. Legislation is also planned to stop off-balance sheet vehicles being used to hide losses, to require the rotation of audit partners or firms, and to increase cross-border shareholders' rights. The Commission has issued recommendations urging companies to disclose boardroom pay and boost the role of independent directors.
Mr Winter dismissed fears that slow, voluntary reform in Europe could lead to the rules-based US approach seen in the Sarbanes-Oxley act becoming the global standard.