The Corporate Governance Codes and their Implementation in the European Union Prof. Eddy Wymeersch OECD Russia Corporate Governance Roundtable Moscow, October 2013

Disclaimer: The views expressed in this presentation are those of the authors and do not necessarily represent the opinion of the OECD Russia Corporate Governance Roundtable, the OECD or its Member countries, or of the Moscow Exchange. OECD Russia Corporate Governance Roundtable Moscow, October 2013

European regime All EU states must designate one corporate governance code for listed entities: based on Comply or Explain Codes are generally self-regulation, but with nuances: more or less state influence Implementation is voluntary: pressure by the markets, shareholders (activists), press, public opinion: sometimes significant items e.g. on ‑ Remuneration issues ‑ Conflict of interest matters, including controlling shareholders ‑ Gender policies ‑ Takeovers, position by activist investors

European practice Surveys: state of implementation in % of population- done by CG commission or privately, e.g. academic, consultants, or some by Securities Commissions (France, Belgium, Spain, Italy) Compliance and “derogations” Statistical data are useful, incentive to improve practices, but ensure only Formal compliance Substantive compliance is difficult to ensure

European practice Derogations with explanation ‑ Explanations should be specific not boilerplate  Eg “ is best interest of the company”  Eg ‘ long standing practice”  No explanation No monitoring is several States ‑ Sweden, Luxembourg, Germany, Italy ‑ But : is there a Risk of Liability ?

External Monitoring (1) Spain and Portugal ‑ Securities Commissions verify annual reports for incomplete, misleading or even false statements ‑ Open discussions with issuers to correct ‑ Disclosure as ultimate remedy (“name and shame”), rarely fines United Kingdom ‑ FRC opens dialogue on specific issues, no individual monitoring

External Monitoring (2) France ‑ Proposal for monitoring by professional body: June 2013 ‑ “Haut Comite de suivi de l’application du Code” Non-application of code provision without sufficient explanation Application or interpretation of code provision Action on complaint or on own initiative Opinion by the Comite to be published in case of refusal to comply and reasons for non-compliance

Conclusion Self regulatory codes is best approach if effectively implemented Market monitoring is usually too weak Some external monitoring but should remain self regulatory. This is the present trend