Compliance of Companies with Corporate Governance Codes: Case Study on Listed Belgian

Sven H De Cleyn

doi:10.15209/jbsge.v3i1.127

Abstract

Listed and large companies become increasingly subject to internal and external pressure to comply with ethical and social standards. This article focuses on one aspect of this matter, namely the corporate governance issue. Within the framework of recent corporate scandals, this paper investigates whether and to which extent Belgian publicly listed SMEs comply with the Belgian Code on Corporate Governance after its first year of introduction, which has been constituted in the framework of the European Action Plan on Corporate Governance.In a sample of 78 Belgian listed SMEs, the compliance with the Code is analysed. After its first year of introduction, companies comply with on average 70% of the Code’s provisions. The most problematic topics in terms of disclosure of information seem to relate to (individual) remuneration, private information and content of shareholders’ meetings.

Highlights

Listed companies become increasingly subject to internal and external pressure to comply with ethical and social standards (Levis, 2006)
The attention paid on the corporate governance issue has been growing unremittingly, especially since some large corporate failures due to fraud and manipulation in the nineties (Becht et al, 2005; Coffee, 2005; Commission of the European Communities, 2003; Marnet, 2007)
The results show that – on average – the listed Belgian SMEs included in the sample comply with 70 % of the provisions as stipulated by the Belgian Code on Corporate Governance after the first year of its introduction

Summary

Introduction

Listed companies become increasingly subject to internal and external pressure to comply with ethical and social standards (Levis, 2006). This article focuses on one aspect of this matter, namely the corporate governance issue. The attention paid on the corporate governance issue has been growing unremittingly, especially since some large corporate failures due to fraud and manipulation in the nineties (Becht et al, 2005; Coffee, 2005; Commission of the European Communities, 2003; Marnet, 2007). Many countries engage in debates on the implementation and enforcement of a corporate governance code or law for companies. In 2003, the European Commission formulated an action plan on corporate governance, intending to enhance transparency and the disclosure of information (Berglöf 1997; Berglöf and Pajuste, 2005). Information disclosure is seen as a pillar in the move towards better governance of European companies (Dalton and Dalton, 2006a). The ultimate goal of the EU is to foster the global efficiency and competitiveness in EU companies and safeguard the position of shareholders and all stakeholders involved

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Conclusion