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ecoDa’s EU Updates – November 2014
a.s.b.l.Confédération Européenne des Associations d’Administrateurs
European Confederation of Directors’ Associations
EU Updates – November 2014
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ecoDa’s EU Updates – November 2014European Commission:
Objectives for the Commission:
The European Commission has issued its 2014 working programme."2014 will be a year of delivery and implementation", President Barroso said. The Commission will continue work on completing the banking union, and reinforcing economic governance. The adoption of the Single Resolution Mechanism Fund is a priority, and the Single Supervisory Mechanism becomes operational in 2014.
New European Commission:
Unit MARKT F2 (Corporate Governance, Social Responsibility) has moved from DG Internal Market and Services (MARKT) to the Directorate-General for Justice (JUST).
On October 1st, ecoDa and EuropeanIssuers sent a letter to Martin Selmayr, Head of Transition team, European Commission (Juncker’s Cabinet) to address their concerns highlighting that: “Much of corporate governance is not a matter of legislation, but of best practice, behavior and culture. Moving such a matter from MARKT to JUST would in this sense send the wrong signal against self-regulation and the role of national corporate governance codes”. See here. Briefing notes were also sent to Members of the European Parliament (MEPs) in advance of the Hearings of the Commissioners Designate.
On November 1st, the new Commission has come into force. See here the new structure.
Jonathan Hill, UK Leader of the upper house of the British parliament has been elected as the new Commissioner for the new Financial Stability, Financial Services and Capital Markets Union portfolio.
Věra Jourová, the former Czech minister for regional development, is now Commissioner for Justice, Consumers and Gender Equality.
See also the organization chart of the new DG Financial Stability, Financial Services and Capital Markets Union
European Parliament:
New European Parliament:
Pavel Svoboda (EPP, Czech Republic) has been appointed chair of the JURI Committee (legal affairs) – the full list of members can be found here
Roberto Gualtieri (S&D, Italian) has been appointed chair of the ECON Committee– the full list of members can be found here
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ecoDa’s EU Updates – November 2014
Table of Contents
Gender diversity in boardrooms............................................................................................................................................................................. 4Non-financial reporting /Boards’ diversity...........................................................................................................................................................11Duties and liabilities of board members.............................................................................................................................................................. 16CRDIV Recruitment Selection and nomination processes.................................................................................................................................17Recommendation on CG Reporting (Comply or explain principle)...................................................................................................................20Employee share ownership................................................................................................................................................................................... 22Shareholders’ rights.............................................................................................................................................................................................. 27Audit........................................................................................................................................................................................................................ 37CRDIV...................................................................................................................................................................................................................... 41Company Law......................................................................................................................................................................................................... 45Long-term financing of the European economy..................................................................................................................................................49Revision of the OECD CG Principles....................................................................................................................................................................51Capital Markets Union............................................................................................................................................................................................ 52Transparency Directive.......................................................................................................................................................................................... 54IFRS......................................................................................................................................................................................................................... 55Market Abuse.......................................................................................................................................................................................................... 56
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ecoDa’s EU Updates – November 2014
Gender diversity in boardrooms
Subject European Commission
European Parliament
Other institutions
State of play + documents ecoDa’s actions
Gender diversity in boardrooms
2011 Board Plegde
2011 Green Paper on CG Framework +2012 Consultation on Gender imbalance in corporate boards in the EU
2012 EC Report
2011 and 2012 Initiative reports from the European Parliament
In 2011, Vice-President Viviane Reding launched the 'Women on the Board Pledge for Europe' calling for publicly listed companies in Europe to voluntarily commit to increasing women's presence on their boards to 30% by 2015 and 40% by 2020. A year later, only 24 companies had signed the pledge.
The majority of the respondents rejected the idea of listed companies being required to ensure a better gender balance on the boards
2012 Consultation
The European Parliament called for legislation in its resolutions of 6 July 2011 and 13 March 2012 on equality between women and men in business leadership in the European Union. http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+TA+P7-TA-2011-0330+0+DOC+XML+V0//ENhttp://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+TA+P7-TA-2012-0069+0+DOC+XML+V0//EN
A European Commission report published in March 2012 shows limited progress towards increasing the number of women on company boards has been achieved one year after EU Justice Commissioner Viviane Reding called for credible self-regulatory measures. Just one in seven board members at Europe's top firms is a woman (13.7%). This is a slight improvement from 11.8% in 2010. However, it would still take more than 40 years to reach a significant gender balance (at least 40% of both sexes) at this rate.
The Commission's Legislative Work Programme for 2012 announces a legislative initiative on improving the gender balance in companies listed on stock exchanges.
ecoDa conference in 2011
ecoDa responded to the consultation – Responses were also sent to DG Markt.
In March 2012, ecoDa provided DG Justice with an European benchmark on election mechanisms to company boards in EU Member states
ecoDa letter to
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ecoDa’s EU Updates – November 2014Commission's Legislative Work Programme for 2012
Impact Assessment
14 Nov 2012 - Viviane Reding’s draft Directive
Discussion at the European Parliament
Exchange of view and workshop: 20.3.2013
Consideration of a draft report: 29.5.2013
19 June: JURI/FEMM with national parliaments: - 8/9 July: Presentation of draft report
Matrix Insight Ltd, a European Public Policy Consultancy based in London, carried out an external Impact Assessment.
The Commission has proposed legislation with the aim of attaining a 40% objective of the under-represented sex in non-executive board-member positions in publicly listed companies by 2020, with the exception of small and medium enterprises.
JURI and FEMM Committees (leading committees)On 22 March 2013, the Legal Affairs and Women's Rights and Gender equality Committees held a workshop to discuss the proposal for a directive aimed at improving the gender balance on corporate boards.
On April 22nd 2013, JURI and FEMM Committees had a joint meeting to discuss the Reding directive on women on boards.
The European Commission made it clear that the proposal is business friendly and proportionate. The directive does no impose strict quotas as such but targets accompanied by procedure obligations. The directive preserves the meritocratic character of directors’ appointments. The legal basis used by the European Commission to take this initiative is the same one as those taken to tackle self-employed people.
Rodi Kratsa-Tsagaropo (Group of the European People's Party (Christian Democrats) Greek, Rapporteur of the FEMM Committee- Main Committee) insisted on the need to stress that the directive is about procedure and that 40% of women on boards is an objective. According to her, since 40% is an objective, it should be applied to any listed companies even where the members of the under-represented sex represent less than 10 per cent of the workforce (contrary to the opinion of the Internal Market and Consumer Protection Committee- IMCO committee).
Evelyn Regner (Group of the Progressive Alliance of Socialists and Democrats, Austrian, co-Rapporteur for JURI Committee- Legal Affairs Committee, Main Committee) insisted on the fact that the European Commission has taken a cautious approach which takes into account the different national perceptions. The legal affairs committee will have to express itself on the legal basis of the directive to respond to the legal services of the Council which are critical about the legal basis used by the Commission. The legal services of the Parliament will provide elements but the legal affairs committee will have to take a political decision. The timetable is realistic and it is important to involve the national parliaments.
present the initiatives taken by ecoDa members
ecoDa and its members were consulted by Matrix
GNDI’s paper
Creation of an ecoDa WG on diversity on boards (process and selection)
Position paper in June 2013
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ecoDa’s EU Updates – November 201429 August: AM deadline18 September: Consideration of AMs14 October: Vote20 November: Vote Plenary session
IMCO, EMPL, ECON Committees (Advisory Committees)
Marije Cornelissen (Group of the Greens/European Free Alliance, Dutch, Rapporteur for the EMPL Committee- Employee and Social Affairs Committee, Opinion committee) who presented her draft opinion at the EMPL Committee on April 23 rd mentioned that the Reding proposal requires descriptions on how the selection procedure should be. According to Mrs Cornelissen, the directive should leave freedom to companies to fill in what the adjustments should be. The draft directive is clear about reporting and explaining obligations. The Commission aims at targeting Member States and companies that don’t make enough efforts. Companies that do well will have light reporting obligations, while those companies that are not doing enough will have heavier obligations to explain why. The directive is therefore about comply or explain principle with sanctions if the explanations are not good.
Antonyia Parvanova (Group of the Alliance of Liberals and Democrats for Europe, Bulgarian, Rapporteur for the IMCO Committee, Internal Market and Consumer Protection Committee, Opinion Committee) who has already presented her draft opinion repeated that her opinion addresses three objectives: the functioning of the internal market: she wants to stress the importance of diversity for the profitability of companies, legal certainty: importance of having the same rules applied in Europe, economic situation in the EU: the importance of human capital. As you know, one of the main suggested amendments is the deletion of the exemption for listed companies where the members of the under-represented sex represent less than 10 per cent of the workforce. She mentioned that she received 66 proposals of amendments that will be examined on 29 May.
During the debate, one MEP insisted on the need for better transparency on selection procedures.
Olle Schmidt (Group of the Alliance of Liberals and Democrats for Europe, Swedish, Rapporteur for the ECON Committee, Economic and Monetary Committee, Opinion committee) presented his draft opinion on April 24th.Although the EMPL and the IMCO draft opinions are more or less in line with the Reding’s initiative, the ECON draft opinion goes in another direction.
The ECON draft opinion does not support quotas but is in the opinion that companies should be required to set individual targets for their gender balance among both executive and non-executive directors, as well as at all management levels in the company.
The ECON draft opinion also intends to extend the scope of companies targeted by the directive. The possibility of extending the scope to non-listed companies above SME threshold should be reviewed by the Commission two years after the implementation of this Directive.
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ecoDa’s EU Updates – November 2014
Debate at the European Parliament with national Parliaments on the Reding initiative
ICAEW
The ECON draft opinion calls the EU institutions for leading by example and for integrating gender rules.
On May 14th, Vice-President Viviane Reding, the EU's Justice Commissioner, met with Markus Klimmer, Managing Director at Accenture, today to discuss how best to improve gender balance on company boards
Markus Klimmer, Managing Director at Accenture's said: "By 2025 Germany is expected to face a demographic gap in the labour market of 5 million people. One third of this could be filled by increasing the participation of women in the economy. Germany's and Europe's competitiveness critically depends on mobilising all talent available. Women's participation in the labour market is therefore not only a women's or an equality issue but a question of sound economic policy. This issue is too important to be left to the often arbitrary whims of men in leadership positions."
Vice-President Reding added:
"The proposal for a Directive that the Commission put on the table last year to make headway on gender equality strikes a reasonable balance. It is a fair deal both for the business world and for women who have the same right to pursue careers as men.
I am happy that Mr Klimmer and more and more men in the business world are recognising the importance of gender diversity and are supporting our objective. Key players in the business world like Accenture – which already has 36% of women on their board – are setting a good example that which companies should follow."
At the ICAW breakfast last week, Jeroen Hooijer from the Commission made it clear that the Reding initiative has no CG objective (contrary to the non-financial reporting draft directive) but will have impact on CG.
There was a debate at the European Parliament with national Parliaments on the Reding initiative. The European Commission mentioned that:
-One of the important features of the initiative is the emphasis on transparency of the selection procedure.
-The system is aimed to be based on the merits of women
-The European Commission has a clear competence on this topic: gender equality is not a new concern.
-All the surveys show that there is little progress (15.8% of female board members on average in 2012). The progress is too slow.
-Given that the point of departure can be different in every member states, the proposal
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ecoDa’s EU Updates – November 2014
Vote at the plenary session of the European Parliament – 20 November 2013
includes flexibility. According to Article 8, Member states can suspend transparency requirements if their national solutions are as effective as the proposal or work better.
-The majority of national parliaments is rather positive.
-The initiative targets listed companies given that they are better structured to handle the process of transparent recruitment criteria.
The two main rapporteurs insisted on:
-The need to take advantage of workers talents which constitutes a major asset in terms of competitiveness,
-The need to get a framework for common action from member states,
-The directive respect the principles of proportionality and subsidiarity
-If the common goal for member states is to achieve certain quotas in their companies, they have the right to implement this in their own way,
-The draft directive does not burden further companies with bureaucratic measures.
-According to Evelyn Regner, the draft directive should be extended to smaller listed companies.
Most of the national parliaments were represented. For some of them, the main two parties were represented and expressed divergent opinions.
The European Economic and Social Committee and the European Committee of regions have already expressed positive opinion regarding the draft directive.
The European Parliament has voted with an overwhelming majority (459 for, 148 against and 81 abstentions) to back the European Commission’s proposed law to improve the gender balance in Europe’s company boardrooms. The strong endorsement by the Members of the European Parliament means the Commission’s proposal has now been approved by one of the European Union’s two co-legislators. Member States in the Council now need to reach agreement on the draft law, amongst themselves and with the European Parliament, in order for it to enter the EU statute book. The plenary vote follows a clear endorsement for the Commission’s initiative from the Parliament’s two leading committees, the Legal Affairs (JURI) and Women’s Rights & Gender Equality (FEMM) committee on 14 October 2013. The most recent figures confirm that, following the Commission's determined action in this area, the share of women on boards across the EU has been on the rise for the past three years and has now reached 16.6%, up from 15.8% in October 2012..
It confirms the Commission's approach to focus on a transparent and fair selection procedure
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ecoDa’s EU Updates – November 2014
EPCSO Council –
EBA
(a so-called "procedural quota") rather than introducing a fixed quantitative quota.
- Small and medium-sized enterprises remain excluded from the scope of the directive but Member States are invited to support and incentivise them to significantly improve the gender balance at all levels of management and on boards.
- Departing from the Commission’s original proposal, there will be no possibility for Member States to exempt companies from the law where members of the underrepresented sex make up less than 10% of the workforce.
- The Parliament strengthened the provision on sanctions by adding a number of sanctions that should be obligatory, rather than indicative, as the Commission had proposed. Under the Parliament’s text, sanctions for failure to respect the provisions concerning selection procedures for board members should include exclusion from public procurement and partial exclusion from the award of funding from the European structural funds.
The Irish Presidency of the EU held a discussion at the meeting of Employment and Social Affairs ministers (EPSCO Council) on 20 June 2013.
The Council/Ministers are next due to discuss the draft law at their meeting on 9-10 December 2013.
The Council has not taken a formal position on the proposed Directive yet. The proposal was discussed under Irish and Lithuanian Presidency and a progress report by the Lithuanian Presidency was presented to the December EPSCO Council (http://register.consilium.europa.eu/doc/srv?l=EN&t=PDF&gc=true&sc=false&f=ST%2016437%202013%20INIT ). That work will continue under Greek Presidency. The recent elections in several Member States (notably in the Czech Republic and in Germany) that have led to a change in government may lead to a change in the dynamics of the Council deliberations.
No new developments under the Italian presidency
European Banking Authority (EBA): in the financial sector: Recital 60 of the CRDIV Directive:
“To facilitate independent opinions and critical challenge, management bodies of institutions should therefore be sufficiently diverse as regards age, gender, geographical provenance and educational and professional background to present a variety of views and experiences. Gender balance is of particular importance to ensure adequate representation of population. In particular, institutions not meeting a threshold for representation of the underrepresented gender should take appropriate action as a matter of priority”.
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ecoDa’s EU Updates – November 2014
Hearing of Vera Jourova, Designated Commissioner for Justice
OECDEBA will develop Guidelines on diversity benchmarking
no specific CRD mandate, but harmonised data will enable better analysis
2014 ad hoc data collection – Guidelines to be expected 2015/2016
The OECD is conducting a survey on boards’ diversity (in a broad sense). They have already collected the data and are in the midst of drafting the report (should be issued in early 2015).
During her hearing, on 1st October 2014, Vĕra Jourova made it clear that she will support the initiative on gender balance in boardrooms and will try to interact with the Council for a positive outcome.
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ecoDa’s EU Updates – November 2014
Non-financial reporting /Boards’ diversity
Subject European Commission
European Parliament
Other stake-holders
State of play + documents ecoDa’s actions
Non-financial reporting /Boards’ diversity
Directive amending Council Directives 78/660/EEC and 83/349/EECProcedure completed (awaiting publication in Official Journal)The expected expert group and public consultation on the implementation of the new directive will be launched early next year, not this autumn.
DG Financial Stability, Financial Services and Capital Markets Union (Unit F3 Accounting and financial reporting)
2011 Green Paper on CG Framework
2011 Consultation
2011 Communication "A renewed strategy 2011–2014 for Corporate Social Responsibility"
2011 Green Paper: Some of those favouring more specific recruitment policies were against regulation at EU level, considering either national level as more appropriate or even that the company should have the freedom to decide alone on such issues, for instance through its nomination committee.
An online public consultation was concluded in January 2011. Consultations showed different views ranging from some stakeholders calling for some improvements but advocating a voluntary approach, to other stakeholders highlighting the need to improve and clarify the existing legal framework at EU level, and to render information more transparent and comparable. Overall, the majority of respondents to the consultation said that legal regimes differ significantly across EU Member States, and that the current EU legislative framework lacks in transparency, making it difficult for shareholders and investors to properly assess EU companies or take full account of their CSR performances. Most stakeholders argue that better information would translate over time into more sustainable growth and employment in Europe. A summary report of the views expressed in the framework of the above mentioned public consultation is available
A measure was announced
The European Commission set up an Expert Group on Disclosure of Non-Financial
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ecoDa’s EU Updates – November 2014
European Expert Group
2012 Action Plan for Company Law and Corporate Governance 2013 European
Parliament’s resolutions
information by EU Companies.
The Commission has commissioned the Centre for Strategy and Evaluation Services a specific study aiming at providing some qualitative analysis of current reporting practices in the EU.
Different questions have been raised, such as:
- the role of companies’ boards
- the need for integrated reporting
- the assessment of non-financial information by external auditors
- the demand in the financial markets for non-financial information
- and the reporting costs.
The EU 2020 Agenda on sustainable growth and jobs promotes the renewal of corporate social responsibility (CSR). The Single Market Act (SMA) which was adopted in April 2011 aims at opening the doors to new, greener and more inclusive growth. It stresses the importance of strengthening consumer trust and confidence in the EU market, and achieving a highly competitive social market economy with sustainable economic growth. In this framework the Commission is also currently developing a Social Business Initiative (SBI) and, as stated in the SMA, should present a legislative proposal on the transparency of the social and environmental information provided by companies in the course of 2012. Since 2006 the European Parliament has also called the Commission to put forward initiatives in order to strengthen the EU legal framework on social and environmental reporting.
On disclosure related to diversity in the Boards, the Expert Group specified that:The opportunity of including specific information concerning diversity policy in the Boards was also discussed in detail. Although most members agreed on the overall objective of increasing transparency in the board in order to avoid "group thinking", several experts suggested that such issue should be treated consistently with other nonfinancial aspects under discussion. Some experts also questioned the coherence with the other elements under discussion. The view that diversity-related disclosures should not be limited to gender only, but include other material aspects, was also shared by most experts. Two members questioned the opportunity to include diversity at all, and invited the Commission to duly consider all relevant legal implications.
A measure was announced in the Action plan.
On 6 February 2013, the European Parliament adopted two resolutions (“Corporate Social Responsibility: accountable, transparent and responsible business behaviour and sustainable growth” and “Corporate Social Responsibility: promoting society’s interests and a route to
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ecoDa’s EU Updates – November 2014
16 April 2013- Draft directive on disclosure of non financialand diversity information
Proposal for a directive as regards disclosure of non-financial and diversity information by certain large companies and groups
EUROPEAN PARLIAMENT Committee on Legal AffairsDraft report17/10/2013- 19/20 June 2013 Exchange of views on the COM proposal;
- 15 October 2013: deadline to send the draft report to translation;
- 5 November
sustainable and inclusive recovery”), acknowledging the importance of company transparency on environmental and social matters.
http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//NONSGML+REPORT+A7-2013-0017+0+DOC+PDF+V0//EN&language=EN
http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//NONSGML+REPORT+A7-2013-0023+0+DOC+PDF+V0//EN&language=EN
The European Commission has proposed an amendment to existing accounting legislation in order to improve the transparency of certain large companies on social and environmental matters. Companies concerned will need to disclose information on policies, risks and results as regards environmental matters, social and employee-related aspects, respect for human rights, anti-corruption and bribery issues, and diversity on the boards of directors.
On 20 June, a first discussion was organised with the rapporteur (Raffaele Baldassaere) at the JURI Committee. The rapporteur mentioned that the draft directive has the objective to bring existing standards all together. The objectives are to increase transparency and the comparability of non-financial information. If flexibility is needed, it is important to set standards. If there is no comparability, there is no progress in terms of transparency. Proper standards will avoid companies to improve their façade but their substance. Transparency should allow companies to defend themselves on fair competitiveness. Some MEPS stressed the need for penalties for misleading or incorrect statements. Regarding supply chains, companies cannot report for all their suppliers but should provide due diligence and report on how they implement this due diligence.Mr Howit invited publicly BusinesEurope to support the draft directive
Draft report of Mr Baldassaere: The JURI Committee discussed the proposal. Mr Baldassaere made it clear that he supports the approach taken by the European Commission and the comply or explain approach. He suggests some amendments: -Technical amendments: to align the directive with the accountant directive,-Amendments on substance: to enhance the principles of flexibility and comparability.-One proposal on risks in order to make the concept more explicit. In order to avoid side effects on competition, companies should be able to limit the reporting if and when it might arm the interests of the companies. The directive represents for him a first step to more binding CSR. It fixes primary obligations to be developed later.-Regarding the new area of country by country information: he supports the introduction of these new requirements. He believes that greater transparency would help to increase
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ecoDa’s EU Updates – November 20142013: presentation of draft report in JURI
- 12 November: deadline for Amendments
- 26 November: discussion of Amendments
17 December 2013: vote in JURI or discussion on AMC
February/March = vote in plenary.
ECON Committee (advisory committee)
Vote of their report on December 9.
consumers’ confidence in big companies and multinationals. It would also increase companies’ reputation. Investors would have access to more information.
Some MEPs (like Mr Cofferati) insisted on the importance to get information on the supply chain for sub contractors. Taking another approach will be contrary to the European policy on public tendering. Some other MEPS (like Mrs Thein) consider that more transparency will not provide more competitiveness. Companies have not enough time to implement all the new regulations. Mrs Thein is against the introduction of new requirements related to country by country information in that directive.The deadline for amendments: November 12.
Amendments tabled in committee on 15/11/2013. Rapporteur Mr Baldassarre (PPE) informed that ‘160’ amendments were presented to the proposal. Some MEPs want to make it clear that wants to make clear that the proposal does not legislate CSR. There seems to be different concepts of CSR in different European countries. A necessity of impact assessment was pointed out. The proposal looks not realistic at this point for some MEPs.
The Legal Affairs committee voted on Mr Baldassarre's report on 17th December 2013.Interinstitutional negotiations will probably start in January in order to adopt the directive in March (if first reading agreement possible).
The ECON Committee (advisory committee to the JURI Committee/ Rapporteur Sharon Bowles) has issued a draft report + proposed amendments:Amendments review:
Some of the amendments proposed either reducing or raising thresholds of employees in order to fall within this regulation.
There were also propositions to consider a turnover of a company rather than a number of its employees.
A lot of amendments are calling for country-by-country reporting in all sectors. ECON has a strong voice on that.
Mrs Bowels welcomed amendments on diversity requirements A safe harbour clause was introduced. Mrs Bowel warned that it could have huge
consequences on what was already agreed on the extracting companies as it could allow a blanket exemption.
For small companies this non-financial reporting could be a burden so there is a suggestion of introducing 3-tier approach, to differentiate companies. First level companies would be exempted from the regulation, 2nd tier would comply and explain, and for 3d tier it would be mandatory.
Shadow rapporteur stressed that in some countries at present the national authorities can prohibit the publication of certain information. So the question is what does the company has to do in this case?
ecoDa Position paper sent
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ecoDa’s EU Updates – November 2014The vote was done on the 9th of December 2013.
On 26 February, the European Parliament and the Council have reached agreement on an amendment to existing accounting legislation to improve the transparency of certain large companies on social, environmental and diversity matters.Large public-interest entities (mainly listed companies and financial institutions) with more than 500 employees will be required to disclose relevant and useful environmental and social information in their management reports. This includes listed companies as well as some unlisted companies, such as banks, insurance companies, and other companies that are so designated by Member States because of their activities, size or number of employees. The scope includes approx. 6 000 large companies and groups across the EU. The approach taken ensures that administrative burden is kept to a minimum. Companies will be required to disclose concise, useful information necessary for an understanding of their development, performance, position and impact of their activity, rather than a fully-fledged and detailed report. Furthermore, disclosures may be provided at group level, rather than by each individual affiliate within a group. The draft Directive provides for further work by the Commission to develop guidelines in order to facilitate the disclosure of non-financial information by companies, taking into account current best practice, international developments and related EU initiatives.As regards diversity on company boards, large listed companies will be required to provide information on their diversity policy, such as, for instance: age, gender, educational and professional background. Disclosures will set out the objectives of the policy, how it has been implemented, and the results. Companies which do not have a diversity policy will have to explain why not.
The European Parliament adopted this legislation in plenary in April 2015.The Council formally adopted it on 29 September 2014. Member states will have 2 years to incorporate the new provisions into domestic law which will be applicable in 2017.
The expected expert group and public consultation on the implementation of the new directive will be launched early next year, not this autumn.
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ecoDa’s EU Updates – November 2014
Duties and liabilities of board members
Subject European Commission
European Parliament
Other stakeholders
State of play + documents ecoDa’s actions
Duties and
liabilities of board members
External Survey for the European
Commission
London Business School conducted a study on the duties and liabilities of board members. The study is on line.Countries reports are available.The European Commission might look again at the study on Directors’ Duties & liabilities carried out for them by the London Business School as soon as they will have issued their initiatives on shareholders’ rights and CoE.
A WG with AIG on the related topic to be set out- An interim report at ecoDa’s 10th anniversary.
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ecoDa’s EU Updates – November 2014
CRDIV Recruitment Selection and nomination processes
Subject European Commission
European Parliament
Other stakeholders
State of play + documents ecoDa’s actions
CRDIV Recruitment
Selection and
nomination processes
CRDIV Directive
CRD IV requirements and national company law to be met Recruitment processes:
important to find the best suited people start in time – succession planning define the competencies / profile needed assessments of conflicts of interest of potential candidates independent members and nominations in a group context
Selection needs to be done in the best interest of the institution: Nomination committee to play an active part in identifying and
recommending candidates and in increasing diversity Reputation and Experience – annual reassessment Soft skills and independence of mind Board composition – all business areas and risks covered Diversity (gender, age, educational and professional background) Interest of owners and other aspects
Diversity policy to be established: Improve diversity over time – policy to be
established (gender quotas) Possible conflicts between diversity and
nominating the best candidate Challenges for small boards
This directive limits the number of directorships and specifies in its article 91: “The number of directorships which may be held by a member of the management body at the same time shall take into account individual circumstances and the nature, scale and complexity of the institution's activities. Unless representing the Member State, members of the management body of an institution that is significant in terms of its size, internal organization and the nature, the scope and the complexity of its activities shall, from 1 July 2014, not hold more than one of the following combinations of directorships at the same time: (a) one executive directorship with two non-executive directorships; (b) four non-executive directorships.”
ecoDa Annual conference on April 29, 2014
A WG on boards’ selection and composition with Korn Ferry – A guidance to be issued at ecoDa’s 10th anniversary
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ecoDa’s EU Updates – November 2014
EBA Guidelines
Update of the EBA
guidelinesDecember
2015
The CRDIV Directive was published on 27 June 2013 and fully enters into force on 17 July 2013. Institutions are required to apply the new rules from the 1 January 2014 with full implementation on 1 January 2019.
EBA Guidelines on Internal Governance:Management bodies (as defined by CRD) duties and responsibilities
organisational structure business and risk strategy control framework
Composition of the Management Body Adequate number and appropriate composition - proportionality Sufficient collective expertise – all business areas / control areas /
risks Planning of succession – policies for selecting members (incl.
competencies needed and proper process) Identification and management of conflicts of interest Functioning of the Management Body Regular meetings – sufficient time commitment Specialised committees (e.g. risk, audit, nomination, remuneration) Ongoing ability to function properly (e.g. Induction and training)
Regarding Art 91 – EBA to issue Guidelines by 31.12.2015
time commitment – how to assess time needed for mandates? number of directorships – how to define significant institutions? the notion of diversity to be taken into account for the selection of
members Guidelines on the suitability already in place: update needed regarding collective knowledge, skills and
experience (all business areas and risks) possibly update other aspects based on experience sufficient resources for induction and training – how to define?
The European Banking Authority (EBA) has to define the notion of “significant banks” before the end of 2015.Possible notion of significant banks:- The total value of its assets exceeds €30 billion. - The total value of its assets exceeds €5 billion and the ratio of its total assets over the GDP of the SSM state in which it is established exceeds 20%.
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ecoDa’s EU Updates – November 2014- It is one of the three most significant credit institutions in a SSM state. - The national competent authority considers it to be significant with regard to the domestic economy and the ECB agrees. Proportionality applies in both ways – large and complex institutions need to fulfil higher governance standards than small and less complex institutions.
Even if the directive states that EBA has to define the notion of “significant banks”, national regulators like in Luxembourg don’t wait for EBA to define their own criteria. Luxembourg is in the process of implementing the CRDIV directive and has just defined by royal decree what they consider as significant banks. 10 banks have been already identified as such. The consequences for their board members are important and those decisions might impact the level of their remuneration.
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ecoDa’s EU Updates – November 2014
Recommendation on CG Reporting (Comply or explain principle)
Subject European Commission
European Parliament
Other stakeholders
State of play + documents ecoDa’s actions
Recommendation on
CG Reporting (Comply or
explain principle)
DG Just. Unit F22011 Green Paper on CG Framework
2012 Action plan on CG and Company Law
2014 Recommendation
The Finnish Securities Markets AssociationThe Belgian Corporate Governance CommitteeThe Financial Reporting Council
A large majority of respondents to the 2011 Green Paper were in favour of requiring companies to provide better explanations for departing from codes’ recommendations
The Securities Markets Association issued on 20 January 2012 guidelines on explanations that companies should provide.
Independent study on the quality of explanation issued a numberof practical recommendations in 2012
In the UK, the Financial Reporting Council introduced guidelines on the 'comply or explain approach' in the Corporate Governance Code.
The Commission will take in 2014 an initiative, possibly in the form of a Recommendation, to improve the quality of corporate governance reports, and in particular the quality of explanations to be provided by companies that depart from the corporate governance codes.
The Recommendation was issued on April 9. The Commission’s Recommendation aims to provide guidance to listed companies, investors and other interested parties in order to improve the overall quality of corporate governance statements published by companies.
In November 2014, ICAEW has issued a paper entitled ‘Who should be covered by codes?’ makes a proposal to harness the energy behind the
In 2011, ecoDa took part in the ISS report for the European Commission together with BusinessEurope and Landwell.
ecoDa organised a high level confederation on comply or explain principle in 2012.
ecoDa issued a full report with recommendations for improvement in 2012.
Joint ecoDa, EuropeanIssuers and ACCA Conference on “The Action Plan on CG and Company Law: What’s in it and Why?”, 4 February 2013
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ecoDa’s EU Updates – November 2014ICAEW growing number of group-specific governance codes related to
corporate governance, and explores how this energy can enhance public confidence in companies rather than creating complexity and confusion.
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ecoDa’s EU Updates – November 2014
Employee share ownership
Subject European Commission
European Parliament/ other stakeholders
State of play + documents ecoDa’s actions
Employee share
ownershipCommission /
Parliament should take
action
DG JUST. Unit F2
Research studies
2011 Green Paper on CG Framework
Barnier’ declaration
2012 Action plan on CG and Company Law
Budget line in the 2013 budget for a pilot project
Various studies conducted by the Commission.
Responses indicate that employee share ownership schemes could play an important role in increasing the proportion of long-term oriented shareholders.
EFES managed to convince the European Parliament last year to add a specific budget line in the 2013 budget for a pilot project (on the model of what was done for the creation of Eurofinus and FinanzWatch). This pilot project was deemed necessary to develop training and education centers for share ownership in national European countries. EFES has already aggregated a platform of actors (around 50 associations) to develop the pilot project. Should it be finally decided by DG Trade, the platform would be happy to involve ecoDa in its reflection and actions.
“We have talked about the participation of the work force and ownership. We have to build greater social cohesion in companies because that is a key to unlock growth”
2012 Action plan: The Commission will identify and investigate potential obstacles to trans-national employee share ownership schemes, and will subsequently take appropriate action to encourage employee share ownership throughout Europe.
The tender consists of the following elements (see p.20):
1. Mapping and analysis. This part consists in the collection of information on the different national rules on employee ownership and
ecoDa approached EFES to offer its services for their submission to the EU tender / EFES was finally not awarded.
ecoDa attended conference “Taking Action: Promotion of Employee Share Ownership”
At ecoDa’s board meeting on 19 November 2014, presentation of Daniel Lebègue of IFA’s latest position on the related topic.
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ecoDa’s EU Updates – November 2014April 2013 – Call for tender
participation together with a qualitative and a quantitative analysis of employee share ownership schemes. 2. Information sharing strategy and other policy initiatives. This part consist in the identification of the most appropriate methodology of enhancing knowledge of and access to the information with the aim of reducing the cost of designing efficient schemes, in particular for companies established in Member States where a legislative framework for employee share ownership is poor. 3. An outreach event (roundtable/conference): This part consists in organizing an outreach event to present the interim results of the mapping and analysis project and conclusions.
Questions about corporate governance are especially mentioned under "qualitative data" (page 25). It includes:
- identify the impact of financial participation on corporate governance and involvement of employees in corporate decision making, as well as more generally the relationship between corporate governance and employee financial participation (distinguishing senior management and employees more generally). Particular attention should be devoted to situations when employee pool their shares and therefore their decision making power (through vehicles);- identify the impact of financial participation on corporate governance and involvement of employees in corporate decision making, as well as more generally the relationship between corporate governance and employee financial participation (distinguishing senior management and employees more generally). Particular attention should be devoted to situations when employee pool their shares and therefore their decision making power (through vehicles); the impact of employee financial participation on employee satisfaction and on company performance. In particular, the Commission would like to have evidence on employee satisfaction and company performance taking into account: (i) transparency of the plan, (ii) eligibility and involvement of the employee and information made available (iii) information campaign carried out to promote the plan, (iv) corporate governance structure.
The European Commission has awarded the contract to Stiftung Europa-Universität Viadrina Frankfurt.
A Conference was organized in January 2014 to present the interim results of the mapping and analysis project and conclusions.
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ecoDa’s EU Updates – November 2014
09/ 2014: ETUC Conference
According to the past surveys, firms with Employee Financial Participation (EFP) are more profitable, create more jobs and are better taxpayers than firms without. Firms with ESO gain a bloc of demanding but loyal shareholders who know better the company than the outsiders.The objective of the 29th regime for ESO is to have EU law and state law in parallel. Companies will be able to opt in or opt out. National or EU laws could be default rules. Companies will have the choice between two entire instruments (national or European) but without cherry picking.The European Commission has to find a way to eliminate barriers to the single market and to facilitate cross border operations. To avoid double taxation and discrimination, the EU should create a center of information (CETREPS) to provide both companies and governments with information. It would be a virtual centre for Employee Financial Participation (EFP) with comparative information among the member states and a feedback function to provide comments on the functioning of the system.
On 29 October 2014, the Commission published a comprehensive study on "The Promotion of Employee Ownership and Participation" that provides an overview of the development of employee financial participation, and in particular of employee share ownership, across EU-28 over the last decade. The study describes and analyses in depth a range of policy options to be considered at EU level to reduce the main obstacles to transnational employee financial participation and to encourage it throughout the EU. These options include the creation of a virtual information centre and establishing an optional European legal regime for employee share ownership. Overcoming cross-border barriers to employee financial participation schemes is particularly important in view of the potential for EU companies to implement such schemes and to benefit from their impact. Research presented in this study suggests that companies which are partly or entirely owned by their employees generate more profit, create more jobs and contribute more to tax revenue than companies without employee ownership. These companies also tend to relocate less and favour local production and business succession. See here.
At a conference organized by ETUC(the European Trade Union Confederation), the confederation mentioned that they want to work out a solution (and then to lobby the new EP and Commission) on a mandate to go further with employee representation not linked to the company form. They want not only to focus on economic arguments but instead link employee representation on boards to democracy at the workplace e.g. that workers’ rights’ at a company is part of the parcel of democracy. She also said that ETUC plans to link this debate to the “sustainable company
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ecoDa’s EU Updates – November 2014model”. She also said that ETUC is pushing for directors’ duties to be reframed as long-term duties, rather than as “maximizing shareholder interest/value”.
EUROPEAN PARLIAMENT Committee Employment and Social Affairs
Deadline for amendments – December 3Discussion on 9 January, Vote on 22 January, Plenary on 2 February 2014
Draft opinion of Committee on Employment and Social Affairs (Leading Committee - Rapporteur: Fabrizio Bertot)The draft report calls on the Commission, in cooperation with employee ownership organisations, theMember States and the social partners to develop a non-binding framework concept on basic principles for successful EFP schemes + Calls on the Member States to engage employee ownership organisations and stakeholders more closely in dialogue between policy makers, employers and workers’ representatives, including the social partners where relevant, in order to ensure that existing examples of best practice at national level are taken into account in the development of nationalpolicies to facilitate the implementation of EFP by businesses;
Draft opinion of the Committee on Economic and Monetary Affairs (Advisory Committee)Proposed amendments:For a potential opt-in 29th regime: Parliament viewed with interest a potential opt-in 29th regime as an optional single legal framework open to employers throughout the EU, which would respect areas of Member State competence on fiscal and labour law, based on a market-based approach, improved transparency and access to information to facilitate equal implementation in different Member States. This model would be applicable at the national and/or EU level when needed and not being restricted to cross-border companies.It encouraged the Commission to present an independent impact assessment on such a regime. Following the publication of the independent impact assessment, Members called on the Commission to consider developing a set of basic guidelines for successful EFP schemes encompassing the following elements:
objective-led: companies should determine the objectives of an EFP scheme in order to select the model that is most appropriate for them;
flexible in operation and voluntary, operating differently in different sectors, companies of different sizes and types and offering employees a choice about how to benefit from a closer financial relationship with their employer;
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ecoDa’s EU Updates – November 2014 additional/complementary to contractual remuneration; negotiated by social partners; clear information must be given to employees on the risks and
rights attached to opting into an EFP scheme.Involvement in governance should also be noted with workers enabled to become directly involved in the governance of a company.http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//NONSGML+REPORT+A7-2013-0465+0+DOC+PDF+V0//EN
On the very last date of its mandate (30 Oct. 2014), Commissioner Barnier addressed a letter to the Chair of the ECON Committee, Mr Gualtieri, at the European Parliament to present the study on the "Promotion of Employee Ownership and Participation". He invites the European Parliament and the European Commission to work closely together when considering the next concrete steps in this area.
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ecoDa’s EU Updates – November 2014
Shareholders’ rights
Subject European Commission
European Parliament
Other stakeholders
State of play + documents ecoDa’s actions
Shareholders’ rights
(See subsections below)
DG JUST. Unit F2
2014 Shareholders’ rights directive
The European Commission issued a new shareholders’ rights directive on April 9, 2014
The JURI Committee at the European Parliament will organise a hearing on the shareholders’ rights directive in 2014.
At the IC-A conference held on 13.11.2013, Jeroen Hooijer spoke about the upcoming shareholders’ directive and comply or explain recommendation to be issued in January 2014.He specified the following points related to:remuneration : the directive might:- Grant a say on pay to shareholders- Introduce a template to compare remuneration- Improve transparency on remuneration policies and individual remuneration of directors (ex ante or ex post).related party transactions:- The directive might request independent advisor for fairness opinion for transactions of 3 – 10% of the assets- Be also aware that the European Securities and Markets Authority (ESMA) has published a statement containing a white list of shareholder activities which will not amount to acting in concert in the context of the Takeover Directive. It also contains information on how shareholders may cooperate in order to secure board member appointments by setting out factors that national authorities may take into account when considering whether shareholders are acting in concert.http://www.esma.europa.eu/news/Press-Release-ESMA-clarifies-shareholder-cooperation-takeover-situations?t=326&o=home+ http://www.esma.europa.eu/system/files/2013-1645_esma_clarifies_shareholder_cooperation_in_takeover_situations.pdf - Be also aware that the OECD has published a report on the supervision and enforcement of corporate governance arrangements concerning related party transactions, takeover bids and shareholder meetings http://www.oecd.org/corporate/supervisionandenforcementincorporategovernance.htm
GNDI Paper on shareholders-board communication
ecoDa’s position Paper
Lutgart Van den Berghe and BRB meeting the assistant of Sergio Cofferatti, on October 15, 2014.
9/10/2014: Eurosif Conference (See EU Alert 41)
Lars-Erik Forsgardh speaking at the 15th CG Conference on October 28, 2014 in Milan (see Alert 46)
Dinner with the Kangourou Group at the European Parliament for Lars-Erik
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ecoDa’s EU Updates – November 2014
JURI (lead) Rapporteur: Cofferati (S&D, IT)
Timeline:11/11/2014 Exchange of views
12/2014 Consideration of the draft report
02/12/2014 Hearing in EP
01/2015 Presentation of draft report
02/2015 Deadline for
The new proposal (issued on April 9, 2014) to revise the existing Shareholder Rights Directive tackles corporate governance shortcomings relating to listed companies and their boards, shareholders (institutional investors and asset managers), intermediaries and proxy advisors (i.e. firms providing services to shareholders, notably voting advice).http://ec.europa.eu/internal_market/company/docs/modern/cgp/shrd/140409-shrd_en.pdfThe original Shareholder Rights Directive agreed in 2007 improved shareholders’ access to company information and allowed them to vote by distance. This revision is more ambitious and includes proposals that straddle a number of different objectives such as increasing shareholder participation and promoting the Commission’s wider objective of improving the environment for the long term financing of the European economy. The proposal has much in common with the Kay Review in the UK. The disclosure of the relationship between the asset manager and institutional investor is a core element of the proposal. A second element is the requirement for greater disclosure of the remuneration of the directors’ of listed companies. The proposal broadly extends disclosure requirements that have been introduced to the financial services sector through the Capital Requirements Directive, the UCITS V directive and the Alternative Investment Fund Managers Directive to the directors of listed companies.
On 11 November, the JURI Committee gave a positive and constructive input. The Rapporteur Cofferati expressed that stakeholders should receive a similar attention as for shareholders from the regulators. He clearly supported the ratio with employee remuneration. The EPP shadow rapporteur stated that the new requirements on related party transactions should not damage the competitiveness of European companies.
The ECON Committee – the advisory committee for the shareholders’ rights directive (Olle Ludvigsson being the rapporteur) – has already drafted its opinion. The rapporteur would like to put this initiative into the overall context of stakeholder involvement in corporate governance. While this specific proposal focuses on shareholders, one should bear in mind that other actors – such as employees, consumers and local communities – are also highly relevant. For companies to be well-run, there has to be respect for and active engagement from all stakeholders. The draft opinion includes the following amendments:
Forsgardh and BRB on November 11, 2014. See EU Alert 46)
Lars-Erik Forsgardh and BRB meeting Olle Ludvigsson, the rapporteur for ECON Committee on November 18.
18/11/2014: A meeting with MEPs with Pervenche Berès (ECON Committee, French) + Virginie Rozière (JURI & IMCO Committee, French). Lars-Erik Forsgardh, Roger Barker, and BRB being present.
26/11/2014: BRB participated to the Policy Committee of EuropeanIssuers.
02/12/2014: Lutgart Van den Berghe speaking at the hearing organized by the JURI Committee on December 2,2014.
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ecoDa’s EU Updates – November 2014amendments 24/03/2015 Committee Vote
Shadow rapporteurs:
Toti (EPP-IT)
Maštálka (GUE/NGL- CZ)
Pascal (Greens/EFA - FR)
Wikström (ALDE - SE)
ECON (opinion) Rapporteur : Ludvigsson (S&D - SE)
Shadow rapporteurs:
Fox (ECR – UK)
Schwab (PPE – DE)
Scott Cato (Verts/ALE – UK)
Van Nieuwenhuizen (ADLE – NL)
Timeline:
Council: Working Party on 26 November 2014
For a system with remuneration policies to be rational and meaningful, the policies cannot too often or too much be put to the side. Therefore, an exemption from a policy should be accepted only if it affects maximum amounts of remuneration and the situation is exceptional – for example if the company is in a leadership crisis (Article 9a). If a company has gone beyond a policy once and wants to do so again, it is reasonable that it presents a proposal for a revised policy to the shareholders.
With the aim of upholding transparency and maintaining a level playing field, the ratio between the remuneration of directors and employees should always be included in remuneration policies (Article 9a). This ratio will have to be interpreted differently depending on for example the business and geographical set-up of the company. However, it is always a useful metric which could and should be disclosed by all companies.
On related party transactions, the Commission’s proposal is a little too ambitious (Article 9c). There should be a proper European minimum level to counter a problematic pattern of abusive transactions, but that level does not have to be very high. A bit of back-tracking is needed. In particular, it seems reasonable to let it be up to Member States, depending on national conditions and practices, to decide if the requirement to hold a shareholder vote is proportionate for all 5%+ related party transactions, or if it should apply only to transactions which are not concluded on market terms.
The Italian presidency is very ambitious and would like to have a general approach by the end of its mandate. The European Commission and the Italian presidency work on redrafting related party transactions proposal (different Member States which have just implemented new national regulation are not interested by harmonization) + the remuneration part (judged too technical).
02/12/2014: Second meeting for Lutgart Van den Berghe and BRB with the assistant of Sergio Cofferati. 9/12/2014: Lars-Erik Forsgardh participating at the International Investors‘ Conference in Wiesbaden/Germany.
February 2015: Conference organized by ecoDa, EuropeanIssuers, ACCA and BusinessEurope
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ecoDa’s EU Updates – November 201408/12/2014 Presentation of draft report
06/01/2015 Deadline for amendments
26-27/01/2015 Consideration of amendments
23-24/02/2015 Committee Vote
A possible compromise stated that: “Member States shall ensure that the vote of shareholders on the remuneration policy is binding. However they may provide that the vote is advisory provided hat where shareholders vote against the remuneration policy, a revised policy is submitted for approval by the shareholders at the next general meeting.”
.
Engaging shareholders
Green Paper Long-term financing of the European EconomyDeadline: 25 June 2013
Green Paper: On the basis of the outcome of this consultation, the Commission will consider the appropriate actions to pursue further.
Follow up of the Green Paper on long term financing: all options are possible, including whether they would include or not soft or hard law initiatives, which could cover both financial markets and intermediaries, as well as users of financial services, like SMEs.
Eurosif (European Sustainable and responsible investment Forum) has organised a conference on 24 September 2013 on long-term financing + shareholders’ rights. Jeroen Hooijer made it clear that shareholders’ engagement is a major branch of the European action plan. As reflected in the John Kay’s report, direct ownership is very limited in EU. The Commission has no illusion that one or two solutions will enable shareholders’ engagement but it is important to realign incentives.- increase the information screen,- asset owners should be more transparent,
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ecoDa’s EU Updates – November 2014- companies need to be willing to be engaged in a positive dialogue (different approaches exist in Europe: German CEOs are reserved).- Transparency requirements / voting policies- Vote on remuneration policy- Disclosure of related party transactions,- Clarifications regarding proxy agencies.Eurosif has issued a report on active ownership: www.eurosif.orgEurosif recommends that policy-makers:o Mandate strong (ESG) corporate disclosure,o Incentivise investor stewardship via smart regulation (fiduciary duties, voluntary codes),o Remove technical barriers (share-blocking, investors’ identification, etc)o Impose investors’ disclosure on their voting policiesThe new shareholders’ directive (article 3f):
Sets out the need for institutional investors and assets mangers to develop a policy on shareholder engagement covering a number of actions set out in the article including policies to manage actual or potential conflicts of interests
Requires institutional investors and asset managers to publicly disclose their engagement policy on an annual basis along with its implementation and results
Better shareholder oversight of related party transactions
2011 Green Paper on CG Framework
2012 Action plan on CG and Company Law
2013 Review of the shareholders’ directive
European CG Forum
European CG Forum Issued a statement on related party transactions recommending of common principles across Europe
The 2011 Green Paper raised the question of providing more protection against related party transactions
2012 Action plan: The Commission will propose in 2013 an initiative aimed at improving shareholders’ control over related party transactions, possibly through an amendment to the shareholders’ rights Directive.
The new shareholders’ directive: Requires related party transactions representing more than 5% of
the companies’ assets or transactions which can have a significant impact on profits or turnover to be put up to a vote by shareholders before concluding the transaction
Requires companies to publicly announce transactions that represent more than 1% of their assets and accompany it with a report from an independent third party
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ecoDa’s EU Updates – November 2014 Sets out that related party transactions with the same party within
12 months will be aggregated and if it exceeds 5% needs to be put up for a vote
Proxy advisors
2012 Action plan on CG and Company Law
2013 Review of the shareholders’ directive
ESMA19 February 2013 Final Report
ESMA’s Consultation
Best Practice Principles for Shareholder Voting Research
In 2012 ESMA issued a discussion paper on proxy advisors requesting views on possible regulatory options for proxy advisors, ranging from no action and voluntary measures to quasi-binding or binding EU instruments
2012 Action plan: The Commission will consider an initiative in 2013, possibly in the context of the revision of the shareholders’ rights Directive, with a view to improving the transparency and conflict of interest frameworks applicable to proxy advisors.
The Drafting Committee of the Best Practice Principles for Governance Research Providers has launched a public consultation on the draft Principles which concern activities associated with the provision of shareholder voting and analytical services. The Committee – which is independent from the European Securities and Markets Authority (ESMA) – has drafted the Principles following ESMA’s 19 February 2013 Final Report which states that the proxy advisory industry would benefit from increased disclosure and transparency regarding how it operates. The draft Principles can be found on the website of the Committee.The deadline for submitting responses to the consultation was 20 December 2013
6 Charter Signatories published Best Practice Principles for Shareholder Voting Research & Analysis service providers (issued in March 2014)
► Principle 1: Service QualitySignatories should aim to offer high-quality services that are
delivered in accordance with agreed-upon client specifications. Signatories should have and publicly disclose their research methodology and, if applicable, house voting policies.
► Principle2: Conflicts of Interest ManagementSignatories should have and publicly disclose a conflicts-of-interest
policy that details their procedures for addressing potential or actual conflicts of interest that may arise in connection with the provisions of
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ecoDa’s EU Updates – November 2014services.
► Principle 3: Communication PolicySignatories should have and publicly disclose their policy (or
policies) for communication with issuers, shareholder proponents, other stakeholders, media and the publicSignatories will publish a Statement of Compliance, on a comply-or-explain basis
The new shareholders’ rights directive: Requires proxy advisors to adopt and implement measures to
guarantee that their voting recommendations are accurate, reliable and not affected by conflicts of interest
Requires proxy advisors to annually disclose to the public information in relation to the preparation of their voting recommendations
Sets out information proxy advisors need to disclose
Shareholder identification
2011 Green Paper on CG Framework
2012 Action plan on CG and Company Law
2013 Securities legislation+ shareholders’ rights directive
The 2011 Green Paper asked whether stakeholders saw a need for a European mechanism to help issuers identify their shareholders in order to facilitate dialogue on corporate governance issues. In addition, the Green Paper enquired whether this information should also be made available to other investors. A clear majority of respondents were in favour of such a mechanism.
2012 Action plan: The Commission will propose, in 2013, an initiative to improve the visibility of shareholdings in Europe as part of its legislative work programme in the field of securities law.
The new shareholders’ rights directive: Requires Member States to provide that companies have a right to
identify their shareholders, even when shareholders use intermediaries
Ensures that data protection rules are taken into account
In March 2014, the European Post Trade Group (EPTG) was set up on the recommendation of the European Group on Market Infrastructures (EGMI)
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ecoDa’s EU Updates – November 2014
European Post Trade Group
ECB Shareholders Transparency Taskforce Report
that the dismantling of remaining obstacles to a safe, efficient, and competitive European post-trading landscape would require targeted cooperation between public authorities and the private sector.The EPTG is a joint initiative between the European Commission, the ECB, ESMA, and industry. Its members are representatives of the key players involved in post-trade issues. See here.
ECB Shareholders Transparency Taskforce Report(See here)
Acting in concert
2011 Green Paper on CG Framework
2012 Action plan on CG and Company Law
2014 Guidance (in close cooperation with ESMA and competent national authorities)
ESMA
Shareholders need to know when they can exchange information and cooperate with one another without running the risk that their actions may trigger unexpected legal consequences.
During 2013, the Commission will work closely with the competent nationalauthorities and ESMA with a view to developing guidance to increase legal certainty on the relationship between investor cooperation on corporate governance issues and the rules on acting in concert.
12 November 2013: ESMA clarifies shareholder cooperation in takeover situationsThe European Securities and Markets Authority (ESMA) has published a statement on practices governed by the Takeover Bid Directive (TBD), focused on shareholder cooperation issues relating to acting in concert and the appointment of board members.The statement contains a White List of activities that shareholders can cooperate on without the presumption of acting in concert. It also contains information on how shareholders may cooperate in order to secure board member appointments by setting out factors that national authorities may take into account when considering whether shareholders are acting in concert.
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ecoDa’s EU Updates – November 2014The statement is in response to a request by the European Commission for clarity on these issues, following its 2012 report on the application of the TBD. It is based on information collected about the TBD’s application and common practices across the European Economic Area (EEA). The statement was prepared by the Takeover Bids Network, a permanent working group, under ESMA’s auspices, that promotes the exchange of information on practices and application of the TBD across EEA
Disclosure of voting and engagement policies
2011 Green Paper on CG Framework
2012 Action plan on CG and Company Law
2013 Review of the shareholders’ directive
UK Stewardship CodeDutch Eumedion best practices
EFAMA Code
ICGN Principles
Research conducted in preparation for the Commission Green Papers of 2010 and 2011 and the responses to them highlighted a need for improvement in the transparency of voting policies adopted by institutional investors, including asset management firms, and the exercise of these policies.
UK Stewardship Code
Dutch Eumedion best practices
EFAMA Code
ICGN Principles
The Commission will in 2013 come with an initiative, possibly through modification of the shareholders rights Directive35, on the disclosure of voting and engagement policies as well as voting records by institutional investors.
See above
Executive remuneration
2010 Resolution
European Parliament resolution of 7 July 2010 on remuneration of directors of listed companies and remuneration policies in the financial services sector
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ecoDa’s EU Updates – November 2014
2011 Green Paper on CG Framework
2012 Action plan on CG and Company Law
2013 Review of the shareholders’ directive
ICGN’s Consultation
Green Paper: Shareholders need clear, comprehensive and comparable information on remuneration policies and individual remuneration of directors.
ICGN consulted its members on its latest guidance draft “ICGN Executive Remuneration Guidelines and Model Policy”.
The Commission will propose in 2013 an initiative, possibly through a modification of the shareholders’ rights Directive, to improve transparency on remuneration policies and individual remuneration of directors, as well as to grant shareholders the right to vote on remuneration policy and the remuneration report.
The Commission will have to expand the remuneration guiding principles (no rigid rules, no capes) stated in the CDRIV directive but they will not cut and paste these principles for listed companies
The new shareholders’ right directive: Ensures that shareholders have the right to vote on the
remuneration policy for directors Requires remuneration policy to be submitted to the approval of
shareholders every three years Requires criteria for the award of fixed and variable remuneration Requires remuneration policy to be publicly disclosed on the
company’s website after approval by the shareholders
Benchmark among ecoDa’s members of the say on pay
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ecoDa’s EU Updates – November 2014
Audit
Subject European Commission
European Parliament
European Council
State of play + documents ecoDa’s actions
AuditDG Financial Stability Unit F4
2010 Green Paper on Audit
2011 Draft proposal
2011 Report
http://ec.europa.eu/internal_market/consultations/docs/2010/audit/green_paper_audit_en.pdf
Rapport of Mr Massip Hidalgo adopted in September 2011http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//NONSGML+REPORT+A7-2011-0200+0+DOC+PDF+V0//EN&language=EN
The Commission issued its proposals in November 2011.
The purpose of these texts is threefold:
- to improve auditors’ independence and audit quality
- to get more dynamism in the audit market
- to reinforce supervisory
5 main elements in this big package of texts:
- mandatory rotation of audit firms after 6 years extended by further 2 years if authorized by supervisor and in situation where there is joint audit the rotation will be imposed after 9 years
- mandatory tendering: Public-interest entities will be obliged to have an open and transparent tender procedure when selecting a new auditor. The audit committee (of the audited entity) should be closely involved in the selection procedure. prohibition of certain non audit services. The Commission sets two categories (one basket of services prohibited and a basket of services that might generate conflict of interest depending of the extend of the job done). In addition, large audit firms will be obliged to separate audit activities from non-audit activities in order to avoid all risks of conflict of interest.
- pure audit for audit firms
ecoDa responded
Participation of Massip Hidalgo at ecoDa conference on 7 September 2011
ACCA (the Association of Chartered Certified Accountants) and ecoDa (the European Confederation of Directors' Associations) organised a joint roundtable on 6 December 2011
30/09/2014: BRB attending the ACCA and EGIAN Conference 'Implementing the new audit reform: how to ensure the creation of a
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ecoDa’s EU Updates – November 2014
Discussion + Vote at the European Parliament
- Prohibition of “big firms” clauses
In addition:
- the audit report will have to be clearer and better adapted to the need of investors
- better supervision and improve coordination at EU level
- An European passport to improve opportunities in the single market + a European quality certificate for a European benchmark and provision on international standards
http://ec.europa.eu/internal_market/auditing/reform/index_en.htm
The Commission will engage in workshops and presentations with Member States and stakeholders, focused on the practical aspects of the implementation of the reform.
Leading Committee: JURI Committee / Rapporteur: Syed KAMALL (UK, European Conservatives and Reformists Group)
The main advisory committees: ECON Committee/ Rapporteur: Kay Swinburne (European Conservatives and Reformists Group
The Rapporteur Sajjad Karim issued on 10 July a working document on Audit Reform as well as impact assessments. “Audit committees are given prominence in the Commission's proposal and the strengthening of their role is of key importance to your rapporteur. Your rapporteur invites consideration of possible methods by which the audit committee's reporting responsibilities could be better defined in order to provide investors with access to greater and more relevant information than is available at present”. The draft reports of the Rapporteur Sajjad Karim:
http://www.europarl.europa.eu/committees/en/juri/draft-reports.html#menuzone
In April 2013, it seems that negotiations on rotation failed at the last shadows meeting, so there is no agreement
In it's final decision document, the European Parliament Committee on Legal Affairs (Juri), the lead parliamentary committee, suggested mandatory audit firm rotation every 14 years and that the longest time for an audit engagement can be 25 years.
The European Parliament adopted the proposal for a Directive amending the Statutory Audit Directive and the proposal for a Regulation on specific requirements regarding statutory audit of public-interest entities in a plenary vote in Brussels on 3 April 2014.
The possibility is introduced for 5% of the shareholders of the company to initiate actions to dismiss the auditors. Regarding audit oversight, the European Securities and Markets
new vibrant market focused on quality"(See EU Alert 40)
Possible WG with PWC on the Audit reform’s impact on audit committees in 2015
ecoDa’s guidance on audit committee
Co-event in September 2012 with ACCA
Intervention of Per Lekvall on behalf of ecoDa at Eurofinuses Conference
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ecoDa’s EU Updates – November 2014
Q&As on statutory audit
European Commission’s worshops
European Council
FEE
Authority (ESMA) has been given a role in managing cooperation at EU level between audit supervisors.
On 4th October 2013, the Committee of Permanent Representatives (COREPER I) authorized the Lithuanian Presidency to start discussions with the European Parliament and the Commission with a view to reaching an agreement in first reading regarding the Proposal
Under proposals released by the UK Competition Commission, the top 350 UK companies would be forced to re-tender their audit work every five years.
The latest version of the compromise text suggests:
Mandatory firm rotation on a 10-year basis, which could be extended for financial institutions by three years by a public interest entity (PIE) and six years if it’s a joint audit; for all other PIEs it could be extended by six years in the case of either a 10-year audit or a 16-year joint audit.
The proposed ‘blacklist’ of prohibited non-audit services would result in a wide-ranging ban on tax and advisory services, combined with a cap of 70% of audit fees.
Final texts adopted on 14 January 2014. (Regulation & Directive)
Texts published in the Official Journal on 27 May 2014 (Regulation & Directive)
In September 2014, he Commission services published “Questions and answers” in order to facilitate the implementation of the new EU regulatory framework on statutory audit, and contribute to a consistent application of the new framework across the Union.
On 3 October 2014, EC transposition workshop for Member States.
In October 2014, FEE has issued a paper on the definitions of Public Interest Entities (PIE) applicable in Europe. A survey has been carried out in order to obtain an overview of the PIE definitions applicable across European countries and the differences therein, to get some insight into the number of PIEs within the EU and to indicate any anticipated changes in the definition with the implementation of the new Audit or Accounting Directives.
Joint letter with BusinessEurope and other stakeholders
GNDI Paper
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ecoDa’s EU Updates – November 2014EGIAN In October 2014, EGIAN (European Group of International Accounting Networks and
Associations) issued a paper. They urges the audit comittes to play their full part in creating an EU audit market (see attached document). Audit committess should lead the auditor process, disclose the links that exist between the board, especially the audit committee and CFO, and the auditor and potential auditor, consider joint audit etc.
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ecoDa’s EU Updates – November 2014
CRDIV
Subject European Commission
European Parliament
State of play + documents ecoDa’s actions
CRDIV
Revised Capital Requirements Directive (CRD IV)
In July 2011, the Commission published the revised Capital Requirements Directive (CRD IV). The document is over 150 pages long, the section on corporate governance begins on page 83.
The text on corporate governance is pretty much the same as the earlier draft that some of you may have seen, with the notable exception of the proposed 30% quota for women on boards which has been dropped. The draft directive includes the following proposed requirements:
• The roles of chairman and CEO cannot be combined unless authorised by the competent authority.
• No individual can hold more than four non-executive directorships or one executive and two non-executive directorships, unless authorised by the competent authority.
• Boards must have a policy “promoting gender, age, geographical, educational and professional diversity” on the board.
• Competent authorities are to ensure that the board undertakes periodic reviews of its effectiveness and takes appropriate steps to address any deficiencies. While it is clear that the board will undertake the review, it is less clear whether it is the board or competent authorities who will judge whether appropriate steps have been taken.
• The European Banking Authority is to develop regulatory technical standards for assessing the suitability of board members which will cover: “the notion of sufficient time commitment”, “the notion of adequate collective knowledge, skills and experience of the management body”, “the notions of honesty, integrity and independence of mind”, “the notion of adequate human and financial resources devoted to the induction and training of members of the management body”, and “the notion of diversity to be taken into account for the selection of members of the management body”.
• The board’s responsibilities for risk are described
Leading Committee: ECON Committee/ Rapporteur: Othmar Karas (Austrian, Group of the European People’s Party)
The trilogues (negotiations between Commission, Parliament and Council) had problems in finding a compromise on bonuses for bankers (introduced by the
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ecoDa’s EU Updates – November 2014
Discussion at the European Parliament
Parliament) and on the provision about introducing a gender quota for financial institutions in the CRDIV.
The Council's discussion focused on the five key issues agreed in the latest round of negotiations between the presidency and the Parliament:
– Requirements for national systemic risk buffers and buffers for systemically important institutions;
– Flexibility for member states to impose stricter national measures to address increased macro-prudential risks;
– Reporting requirements for banks on a country-by-country basis;– Restrictions on bankers' bonuses;– Additional own-initiative mediation powers for the European
Banking Authority.http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/135823.pdf
On the 27 March the deal reached by the Irish Presidency and Parliament on CRDIV and endorsed by Council was finalised. Concretely, the EP-Presidency compromise provides that up to 25% of total bonuses paid may be made up of “discounted” long-term financial instruments (bonuses paid after a minimum period of five years). It must be possible to claw back these instruments or use them to bail out banks in different cases. The idea is to ensure that the value of these types of bonuses that are not received immediately is equivalent to the value of bonuses paid directly in cash. Deferred bonuses do not have the same value (generally less) since they are affected by inflation and different market risks. It will be for the European Banking Authority (EBA) to define in detail the discount factors to be applied. In any event, this provision will have the effect of increasing the amount of bonuses and consequently exceeding the maximum 2-1 ratio between bonuses and salaries.
Following the last technical adjustments, the Parliament's controversial proposal to introduce an EU-wide cap on bankers' bonuses remains in the text. Member States will be required to transpose the Directive by 31 December 2013 if publication takes place in the Official Journal by 30 June 2013.
On 16th April 2013, the parliament has adopted the CDRIV directive at its plenary session yesterday: http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//NONSGML+TA+20130416+SIT-02+DOC+WORD+V0//EN&language=EN
Article 74 (1) CRD IV similar to Article 22 (1) CRD III requires institutions directly to have robust governance arrangements (e.g.
organisational structure, risk management etc) the technical criteria in Art. 76 – 95 shall be taken into account
Article 76 sets out additional requirements42
ecoDa’s EU Updates – November 2014
European Banking Authority (EBA) workshop held on 22 October 2013 in London on proportionality
strengthens independence of the supervisory function and of the control functions
significant institutions to establish risk committee (supervisory function) and audit committee, non significant can combine them;
remuneration and nomination committee – required for significant institutionsArticle 91 CRD IV sets out additional requirements for the Management Body – already broadly covered by EBA GL
suitability of all members required composition shall reflect an adequately broad range of experiences (diversity,
professional and educational background, geographical, sectors) time commitment – number of directorships adequate resources for training and induction
In practical terms only significant institutions fall under the strict limitation of mandates provided by the Art 87 CRD, while in other cases the appropriate number of directorships needs to consider the proportionality aspects, but still the number should be limited. One mandate in a significant institution would lead to the application of the strict limitation. All this should ensure a sufficient time commitment. Obviously in small and less complex institutions a director needs less time to understand the business and the risks compared to a large one and therefore may be able to cope with more than 4 (or given additional approval 5) mandates. EBA will have to develop guidelines on time commitment by the end of 2015.
EBA gathered a couple of hundreds of financial supervisors, regulators, central bankers and bankers of all kinds from all European countries. The program is enclosed. The meeting was chaired by Andre Enria, EBA Chairman who led the workshop, listened carefully to all opinions and evidenced a great sense of pragmatism and moderation.. The unanimous preference is clearly towards “principle based approach”. The “hard “rules of limiting the number of board mandates of bank directors to 4 is widely viewed by regulators as a “political mistake”.
The definition of “significant banks” will be clarified by EBA before the end of 2015. Currently, the dominating criteria for significance remain the assets of the bank, possibly the Risk Weighted Assets. The range of national regulation ceiling for “non-significant “ banks ranges from Euro 1 billion in Austria to Euro 13 billion in Germany.
The concept of significant banks goes much beyond limits on board mandates as it applies to topics such as the obligation to create a nomination committee and a remuneration committee or the disclosure obligation of remuneration.
EBA is planning to address the different issues in separate guidelines, some of them to be drafted and approved before the end of 2014 [remuneration issues]
Patrick Zurstrassen speaking at the workshop
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ecoDa’s EU Updates – November 2014
Round table on Country by country reportingStudy on potential negative impact on country-by-country reporting
EBA Guidelines on “significant institutions”End 2015
The Basel Committee on Banking Supervision
while others [governance issues] will be dealt with in 2015. Those bank governance guidelines will cover issues such as:
- Time commitment of directors- Collective knowledge of the board- Notions of honesty, integrity and independence of mind of directors- Induction and continuing education of directors- The notion of diversity on the selection process.
In this process, EBA is planning to extensively interact with ecoDa as EBA is viewing us as the “European Voice of Directors”. The hard work and drafting period will start at the end of 2014.
EBA will issue Guidelines on “significant institutions”– to be expected end of 2015First orientation – under the SSM credit institutions will be deemed to be significant if any of the following conditions are met:
The total value of its assets exceeds €30 billion. The total value of its assets exceeds €5 billion and the ratio of its total assets
over the GDP of the SSM state in which it is established exceeds 20%. It is one of the three most significant credit institutions in a SSM state. The national competent authority considers it to be significant with regard to
the domestic economy and the ECB agrees.
In October 2014, The Basel Committee on Banking Supervision has published for consultation Corporate Governance Principles for Banks.The deadline for submission of comments to this paper is 9 January 2015.
On 2 October 2014, DG MARKT hosted a round table on Economic Consequences of Country-by-Country Reporting (CBCR) as required by Article 89 of CRD4 where representatives of the financial services sector, civil society and associations are invited to participate.
On 11 November 2014, the European Commission presented at the European Parliament (ECON Committee meeting) its study on the potential negative economic consequences of the public disclosure of the country-by-country information.
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ecoDa’s EU Updates – November 2014
Company Law
Subject European Commission
European Parliament
State of play + documents ecoDa’s actions
Company Law 2011 Conference
Reflection Group on the Future of the EU Company Law2012 Green Paper on Company LawA new expert group
The European Commission organised a Conference on “European Company Law: the way forward” in Brussels on 16–17 May 2011
The Reflection Group on the Future of EU Company Law issued its report in April 2011:
On 20 February 2012, the European Commission has launched an in-depth consultation on the future of European company law.
In May 2014, the European Commission has set up a new expert group on Company Law. The group should assist the Commission in developing policies to improve the framework for cross-border operations of EU companies. For this purpose, the tasks of the group include:
Assist the Commission in improving the mechanism for cross-border mergers by developing possible amendments to the Directive on cross-border mergers;
Assist the Commission in developing an initiative to provide a framework for crossborder divisions, possibly through an amendment of the cross-border mergers Directive;
Advise the Commission on the development of a possible initiative to improve both the information available on groups and recognition of the concept of "group interest";
Advise the Commission on other company law issues, e.g. related to the already existing proposals or new initiatives.
Company Law/ Transfer of seats
2012 Green Paper on Company Law
2012 Action plan on CG and Company Law
Initiative report
The responses to the 2012 public consultation revealed considerable interest in EU rules on cross-border transfers of seats.
European Parliament resolution of 2 February 2012 with recommendations to the Commission on a 14th company law directive on the cross-border transfer of company seats
Throughout 2013, the Commission will conduct public and targeted consultations toupdate its impact assessment on a possible initiative on cross-border transfer ofregistered office. Subsequently, the Commission will consider the appropriateness ofa legislative initiative.
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ecoDa’s EU Updates – November 201414 January 2013- Consultation on cross-border transfer of company seats
Further investigation in 2013 and possible initiative
See the consultation
Company Law/ cross-border
mergers
Directive 2005/56/EC on cross-border mergers of limited-liability companies2012 Action plan on CG and Company Law
Study in 2013 and possibly amending the cross-border mergers directive
The Commission will analyse the conclusions of a forthcoming study on the application of the Directive which will be available in the second half of 2013, taking into account both the experience gained and future needs in this field.In 2013 the Commission aims to report on the outcome of the study and subsequently it will consider the appropriateness of amendments to the Directive on cross-border mergers.
In October 2013, the European Commission issued an external study on the application of the cross-border mergers directive.
In September 2014, the European Commission launched a consultation on cross-border mergers and divisions in order to collect information, which would allow the Commission to assess the functioning of the existing EU legal framework for cross-border operations of companies and any potential need for changes in the current rules. The consultation will run until 1 December 2014.
Company Law/ European
Company (SE) and the European
Cooperative (SCE) statutes
The Commission was reflecting on possible amendments to the SE Statute with a view to making legislative proposals in 2013, if appropriate. The review of the SE Statute would aim at addressing the practical problems in the implementation of the SE Statute as identified by various stakeholders. According to the stakeholders, the multiple references to national law of the SE Statute lead to lack of uniformity of the SE legal form across the EU. It also entails a high degree of complexity as well as uncertainty as to the legal implications of the Statute's directly applicable rules and their interface with national law. Stakeholders have also identified more specific problems underlying the SE Statute, such as heavy cross-border requirements, limited methods of creation, a high minimum
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ecoDa’s EU Updates – November 2014
2012 Action plan on CG and Company Law
Information campaign 2013
Initiative Report
capital requirement and the obligation to have the registered office and the head office in the same Member State. Finally, some stakeholders have mentioned the SE's employee involvement rules as a problem, while some others have referred to the activation of shelf SEs (SEs without any activity or employees set up by a professional provider with the purpose of selling it to interested buyers).
The review of the SE Statute would have to be considered in parallel to a possible modification of Directive 2001/86/EC supplementing the Statute for a European Company with regard to the involvement of employees.
Initiative Report of the EP on cooperative society statute, 13 March 2012
The Commission will, in 2013, launch an information campaign to increase awareness of the European Company (SE) Statute through a comprehensive website bringing together practical advice and relevant documents on the Statute and will examine how a similar action can be undertaken for the promotion of the European Cooperative (SCE) Statute.
Company Law/ Groups of companies
2012 Action plan on CG and Company LawInitiative to be determined, 2014
The Commission will, in 2014, come with an initiative to improve both the information available on groups and recognition of the concept of ‘group interest’.
Company Law/Codification of EU Company
Law
2012 Action plan on CG and Company LawProposal for a codified company law directive 2013
The Commission plans to adopt, in 2013, a proposal codifying and merging major company law Directives.
Single member companies
A proposal in 2014
See the contributions to the EU Consultation
A proposal to harmonize the rules for single members companies in 2014.
The proposal for a Directive on single-member private limited liability companies issued on April 9, 2014 would standardise requirements for the creation of companies with a single shareholder. This proposal aims to make it easier and less costly to set up companies across the EU. In
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ecoDa’s EU Updates – November 2014particular, it aims to encourage SMEs, including individual entrepreneurs, to carry out their activities in other Member States. At the same time, it should also benefit groups consisting of SMEs and larger companies by allowing them to set up single-member subsidiaries according to the same main requirements across the EU. Its particular focus is on subsidiaries (i.e. companies in which another company holds all or parts of the shares or a majority of the voting rights, or has the right to appoint/remove a majority of the board members, or over which another company has the right to exercise a dominant influence) as this is the most frequently chosen legal form of establishment abroad.
09/10/2014: Jeroen Hooijer mentioned that he looks for support to get the initiative approved.
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ecoDa’s EU Updates – November 2014
Long-term financing of the European economy
Subject European Commission
European Parliament
Other stakeholders
State of play + documents ecoDa’s actions
Long-term financing of
the European economy
Procedure completed
DG Financial Stability Unit 02
EU Green Paper- March 2013 European
Parliament Report (ECON Committee)
Deadline for amendments: December 3Discussion: 9 JanuaryVote: 22 JanuaryPlenary: 2 February 2014
European Commission’s Communication
EU Green Paper
Draft report by Wolf Klinz (ECON Committee)
Long–term financing is a precondition for the growth. 70% of financing comes from banks in Europe whereas in USA around 25-30%. Investment is needed in many sectors, including education, technology, transport etc. Apart from commercial banks there are so called development banks that can be helpful together with private investments in financing long-term projects. Best practice approach should be deepened. The existing good practices in Europe could be used. On top of that we must make it easier to access long-term financing. Also by attracting small investors. We should encourage the Commission to consider securitisation and alternative investment funds. There is a need for investor-friendly environment to attract foreign investment.MEPs comments: Harmonisation in tax might have an effect on attracting investment from outside EU as well. The context is very much marked by the crisis. There is an idea of introducing long-term public investors, which exist in France already. They are not banks but they support public and private investments. The commission should be asked to carry out impact assessment about securitisation. There are many issues arising around securitisation especially in US.
In March 2014, the European Commission adopted a package of measures to stimulate new and different ways of unlocking long-term financing and support Europe's return to sustainable economic growth. The Commission's Green Paper consultation on the long-term financing of the European economy of March 2013 initiated a broad debate and lead to replies from all segments of the economy. The package of measures adopted includes a communication on the long-term financing of the economy, a legislative proposal for new rules for occupational pension funds and a communication on crowdfunding.
ecoDa response
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ecoDa’s EU Updates – November 2014Package of measures
The communication on long-term financing builds on the responses to the consultation and on the debate in international fora such as the G20 and the OECD. It identifies specific measures which the EU can take to promote long-term finance.
Main elements:The communication on long-term financing presents a set of specific actions which the Commission will take to improve long-term financing of the European economy. Two of these actions are unveiled t:
a proposal to revise the rules for occupational pension funds (revision of Directive 2003/41/EC on the activities and supervision of institutions for occupational retirement provision - IORP Directive) to support the further development of an important type of long-term investor in the EU ;
a communication on crowdfunding to offer alternative financing options for SMEs.
In the communication, the Commission specifies that: The Commission will consider a Recommendation aimed at improving the
quality of corporate governance reporting, a report on incentives for institutional investors and asset managers to take better account of environmental (for example carbon footprint and climate risks), social and governance information (ESG) in their investment decisions, and a study on fiduciary duties and sustainability.
A conference organised by the European Commission on 6 Nov 2014 on “Finance for growth”
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ecoDa’s EU Updates – November 2014
Revision of the OECD CG Principles
Subject Other stakeholders
State of play + documents ecoDa’s actions
Revision of the
OECD CG Principles
ICGN Global Governance Principles
Expert Consultation on the Review of the OECD Principles of Corporate Governance, published on 17 March 2014.
The OECD is inviting public comment on a draft text of the revised Principles of Corporate Governance (“Principles”).
First released in 1999 and last revised in 2004, the OECD Principles are one of the key standards for sound financial systems of the Financial Stability Board. In 2014, the OECD has launched a review of the Principles to ensure the continuing high quality, relevance and usefulness of the Principles taking into account recent developments in the corporate sector and capital markets.
The draft is a work in progress that has been prepared by the Secretariat of the OECD Corporate Governance Committee in order to solicit input from business and labour representatives, civil society, and other interested stakeholders. It has not been agreed by the Corporate Governance Committee and its content is without prejudice to the final text that will be agreed by the Committee and approved by the OECD Council. Other OECD Committees will also be consulted. (The “track changes” show modifications to the 2004 version of the Principles, with “double underline/strikethrough identifying text that has been moved but not changed.)
Comments can be sent by 4 January 2015
ecoDa’s response on OECD discussion paper (October 2014)
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ecoDa’s EU Updates – November 2014
Capital Markets Union
Subject European Commission
European Parliament
Other stakeholders
State of play + documents ecoDa’s actions
Capital Markets Union
DG Financial Stability
6/11/2014 Conference hosted by EC “Finance for Growth”
Hearing of Jonathan Hill
28/11/2014 the 15th CG Conference in Milan
13/11/2014 Bruegel Policy Contribution
At the 15th CG Conference, Ugo Bassi (Director for Capital and Companies at the European Commission – still in charge of CG until November 1st, 2014) announced a deeper harmonization of CG and company law at European level in the perspective of a Capital Market Union. The European Commission wants to go beyond transparency and provide a single rule book !
On October 1st, 2014, Jonathan Hill announced that he wants to create a “capital market union” for all 28 Member States, to unlock capital which is currently frozen around EU to support businesses and SMEs. He will first identify barriers of progress, get information on SMEs credit status, give input to long term investment funds etc.
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ecoDa’s EU Updates – November 2014Possible Green Paper/White Paper in 2015 (summer)
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ecoDa’s EU Updates – November 2014
Transparency Directive
Subject European Commission
European Parliament
Other stakeholders
State of play + documents ecoDa’s actions
Transparency Directive
Directive 2013/50/EU, Publication 6 Nov 2013
The Transparency Directive has been published on the European Official Journal. The revision of the Transparency Directive provides that ESMA should work on further development of the network of Officially Appointed Mechanisms (OAMs) and consider the potential role of XBRL within that context.
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ecoDa’s EU Updates – November 2014
IFRS
Subject European Commission
European Parliament
Other stakeholders
State of play + documents ecoDa’s actions
IFRS ACCA Conference on “Evaluating the impact of IFRS in the EU” on 25 September 2014
ESMA
Mr Philippe Maystadt was appointed in March 2013 as Special Adviser to reinforce the EU's contribution to International Financial Reporting Standards (IFRS), and to improve the governance of the current EU structures in the field of financial reporting and accounting - the European Financial Reporting Advisory Group (EFRAG) and the Accounting Regulatory Committee (ARC).
Mr Maystadt presented his final recommendations at the ECOFIN Council meeting of 15 November 2013. His report "Should IFRS standards be more European?" is available: The European Securities and Markets Authority (ESMA) has published its response to the report by Philippe Maystadt
On 28 October 2014, the European Securities and Markets Authority (ESMA) published its Public Statement on European Common Enforcement Priorities (Priorities) for 2014. These Priorities identify topics which ESMA, together with European national enforcers, see as a key focus of their examinations of listed companies’ financial statements. The common enforcement priorities encompass the following topics:1.Preparation and presentation of consolidated financial statements and related disclosures;2.Financial reporting by entities which have joint arrangements and related disclosures;and3.Recognition and measurement of deferred tax assets.These topics are important, as they either introduce significant changes to accounting practices following the implementation of new standards, or because the current economic environment poses particular challenges to issuers in the application of certain IFRS requirements, notably when forecasting future taxable profits in periods of low economic growth.
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ecoDa’s EU Updates – November 2014
Market Abuse
Subject European Commission
European Parliament
Other stakeholders
State of play + documents ecoDa’s actions
Market Abuse
The European Securities and Markets Authority (ESMA) has published a Discussion Paper setting out its initial views on the implementing measures it will have to develop for the new Market Abuse Regulation (MAR).MAR aims to enhance market integrity and investor protection. It will achieve this by updating and strengthening the existing market abuse framework, by extending its scope to new markets and trading strategies, and by introducing new requirements.The Discussion Paper presents positions and regulatory options on those issues where ESMA will have to develop MAR implementing measures, likely to include Regulatory Technical Standards, Delegated Acts and Guidelines. These implementing measures are of fundamental importance to the new regime, as they set out how MAR’s enlarged scope is to be implemented in practice by market participants, trading platforms, investors, issuers and persons related to financial markets.In developing these regulatory options ESMA, where similar requirements already exist under the current Market Abuse Directive (MAD), has taken into consideration the existing MAD Level 2 texts and ESMA/CESR guidelines to set out the DP positions in light of the extended scope of MAR.This Discussion Paper is based on the version of the MAR Level 1 text agreed by the European Parliament, the Council and the European Commission on 24 June 2013.The closing date for responses is Monday 27 January 2014.
On 10 March 2014, the European Securities and Markets Authority (ESMA) held an open hearing on its discussion paper on possible implementing measures on the Market Abuse Regulation (MAR) in Paris. ESMA is seeking input from investors that deal in financial instruments and emission allowances subject to the Market Abuse Regulation, issuers of instruments that fall within the scope of the Regulation, financial intermediaries and operators of trading venues.
Brussels, November 2014Béatrice Richez-Baum
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