European Company Law and Corporate Governance: Where Does the Action Plan of the European Commission Lead?

Abstract

The EU Company Law Action Plan of May 21, 2003, is one of the most important documents issued by the European Commission in this field in a long time. It tells what the Commission intends to regulate and not regulate within the next five to ten years. This article explains the background of the Action Plan and its connections with securities, auditing, and takeover regulation and discusses the list of actions in two parts: topics other than corporate governance (inter alia capital maintenance, groups of companies and pyramids, restructuring, and new European company law forms) and corporate governance in particular. Key problems of European corporate governance include better disclosure by an annual corporate governance statement, helping shareholders to exercise their rights, independent directors and committee work, directors' remuneration, responsibility of board members to investors for financial statements, voting policy disclosure by institutional investors, choice between the one-tier and the two-tier board, and generally more shareholder democracy. In 2004 and 2005 the Commission came up with a number of concrete steps to address these problems, especially regarding independent directors and directors' remuneration. The debate this has spawned in the member states is colorful and occasionally highly controversial.