The AMF has today published its report on corporate governance, executive compensation and internal control in small and medium capitalisation companies1, with reference to the Middlenext corporate governance code issued on December 2009.
The report was based on a sample of 30 companies with shares admitted to trading on Euronext Paris (7 companies in Compartment B and 23 in Compartment C). The companies have chosen voluntarily to abide by the Middlenext code, so neither the sample nor the report's findings can be construed as representative of small and midcaps as a whole or of their practices.
The document supplements the AMF's 2010 report on corporate governance and executive compensation released on 12 July 2010.
Broadly, the AMF finds the results to be encouraging in terms of practices and disclosures and to demonstrate compliance with the recommendations of a code aimed specifically at small and midcaps. The same observation applies to internal control and risk management.
In light of the findings, the AMF has set out a number of recommendations and areas for consideration:- Corporate governance: the AMF recommends that companies who do not apply the Middlenext code's provisions on vigilance points, board evaluations and the number of independent directors should give their reasons in detail, in accordance with the "comply or explain" principle. The AMF also made recommendations on disclosures about the membership and functioning of audit committees.
- Executive compensation: the AMF's recommendations apply to the presentation and centralisation of information about remuneration, disclosures about severance pay and variable remuneration, performance requirements for grants of stock options and bonus shares, and explanations about combining an employment contract with corporate office.
- Internal control: the AMF's recommendations relate to use of the template of the framework used for internal control and providing information about the framework's objectives and internal control assessments.
1 Small and midcaps are companies capitalised at less than €1 billion.