As expected, on 5 April, the European Commission launched a public consultation which addresses the ways in which corporate governance can be improved in European companies.

It is primarily focused on listed companies and asks 25 questions on the following three areas:

  • The board of directors: the consultation paper asks whether the EU should seek to ensure that the functions and duties of the chairperson of the board of directors and the CEO are clearly defined. It seeks views on how to ensure better gender balance on boards and on remuneration policies. It also asks about how boards should take responsibility for the company's risk appetite and how to report this to shareholders.
  • Shareholders: in this area, the consultation paper asks how the EU can best facilitate shareholder cooperation, whether a mechanism should be put in place to help issuers identify their shareholders to facilitate dialogue and whether EU law should require proxy advisors to be more transparent.
  • How to apply the 'comply or explain' approach which underpins the EU corporate governance framework: The consultation paper asks whether companies departing from corporate governance codes should be required to provide detailed explanations for those departures (notably, the Irish Corporate Governance Annex to the Listing Rules, which has been in place since last December, focuses on the quality of disclosures made by companies when they depart from the UK Corporate Governance Code).

Timetable

The consultation runs until 22 July 2011. The Commission is expected to produce a summary of the findings of the consultation in the autumn of 2011 and a decision will be made after that as to whether legislative proposals are necessary.