We are approaching the end of the first phase of the Action Plan. The timing is perfect to start a reflection on what should be done in the second phase. That is why the Commission will launch, in the next few weeks, a wide-ranging public consultation. This Conference is the first step in that consultation. We already want to hear your views today. I want to be able to benefit from the considerable expertise and collective wisdom of all those present. And I hope that you will take the time to follow up with detailed comments and suggestions in response to our consultation document. Once the consultation document is issued, there will be a three month period for comments. My door (and particularly that of my staff!), will be open even wider than usual during this period.
Before I address future priorities, I should start by saying something about the first phase of the Action Plan. How well have we done in keeping to the priorities set?
I think it is fair to say that over the past two years, the short term priorities in the Action Plan have been successfully implemented. Priorities and timing have been respected. We are putting the finishing touches to a couple of the outstanding measures. For example, the modification of the accounting directives which I hope will be adopted by the end of the year. This will, amongst other things, allow stakeholders to get a clearer picture of a company’s corporate governance practices by requiring companies to disclose whether they follow a corporate governance code and where they depart from it. We are also finalising our initiative to facilitate the cross-border exercise of shareholders’ rights. Our objective is to try and get the plumbing right so cross-border voting can flow across borders. I intend to submit a draft directive to my colleagues in the Commission by the end of the year.
The main underlying principles in the Action Plan have been twofold: (1) enhancing transparency; and (2) empowering shareholders. These principles will remain equally valid for the second phase. I am convinced that their application will help companies to attract investors and, as a consequence, enable them to increase their production and incidentally their profitability.
However, the short term priority measures were fixed when we were in the business of enhancing investors’ confidence after the financial scandals at the beginning of the millennium. The priorities very much reflected this: improving the framework for EU audit, confirming the responsibility of the board for financial and key non-financial statements, more transparency on directors’ remuneration, strengthening the independence of directors etc.
The context in which we will set our priorities for the second phase is very different. Restoring investor confidence is no longer the main driver. The impetus for what we do next at EU level must now be the tandem of: (1) improving the competitiveness of EU companies- the so-called Lisbon agenda; and (2) the EU’s push towards better regulation.
A few words on the competitiveness angle. Despite having an Internal Market of over 450 million, we still make it difficult for companies to exploit this. We need more entrepreneurs and we need to make it easier to set up, and to wind up, businesses. Let’s face the facts. How easy is it to do business in the EU? Comparatively, not very.
According to the World Bank, only two Member States figure in the world’s top ten countries and eleven in the top thirty. This simply is not good enough: it is not going to get the EU as whole to the top of the league. Much of what needs to be done lies in the hands of the EU Member States. But the EU must not shoot companies and Member States in the foot as they try to get out of the starting block.
If we have a competitive internal market, our firms will have better chances of competing successfully abroad. Globalisation might then be perceived not as a threat but as an opportunity. The priorities we now set in the Action Plan must be conducive to entrepreneurship and making the most of the potential of the international dimension.
Better Regulation is a very important part of trying to get the climate right for business. Talking about Better Regulation in London is a bit like “taking coals to Newcastle”, or perhaps even “teaching your Grandmother to suck eggs”. You have, of course, just hosted, at the end of September, a two days’ conference on this issue. However, Alan Johnson said recently that the challenge would now be to put all these words into actions and this is what I want to focus on now: how can we walk the talk on Better Regulation in the field of the internal market policy and what does it mean for the Company Law Action Plan?
In my view, it means four things.
Firstly, it means consultation with stakeholders, about which I have already spoken.
Secondly, it means only legislating at EU level when that is the best level at which to act and where legislation is the only answer. We need to opt for instruments that put the least burden on companies and leave them as much flexibility as possible. Therefore, we will prefer a recommendation to a directive where a recommendation is suited to achieve the aim pursued. We will look at the measures originally proposed to see if they are still appropriate. For example, whether a directive is really needed on disclosure for institutional investors or whether the market is already moving in the right direction...
Thirdly, it means a comprehensive impact assessment for any new piece of legislation to be submitted to the Commission. This builds on what is now becoming standard practice. Thus, if the Commission adopts a proposal for a directive on shareholders’ rights, it will at the same time approve a detailed impact assessment that will properly assess the benefits and costs for the parties concerned. I believe that the impact assessment is an indispensable tool for improving the quality of our work.
Fourthly, better regulation means we will be adding a new dimension to the consultation on the Action Plan. Three weeks ago the Commission adopted a three year rolling programme of measures to simplify existing EU law as one central element of our Better Regulation project. The existing Company Law Directives are part of this exercise.
Company Law must be accessible and comprehensible. Moreover, most of European Company Law was designed from the late 1960s to the early 1990s. In the meantime markets have changed. So have the needs of companies and stakeholders. Our idea is to work on the adoption of a single legislative text which modernises and simplifies the company law directives by eliminating any dead wood together with any contradictory, overlapping and outdated provisions.
I would not like to disappoint you by failing to mention, before closing, the issue of “one share, one vote”. I would be delighted, by the way, if all announcements from Commissioners in Brussels would trigger the same enthusiastic reaction in the UK press as my uttering of these words a few weeks ago. For me, the shareholder is king or queen: this goes back to what I said at the beginning about transparency and shareholder empowerment. If these principles are followed, I am convinced it will lead to companies which are better run. Pricing of shares on exchanges confirms that this is what the market tends to think. But I am not naïve. I have heard about the fierce debates at the time the Takeover bids Directive was negotiated and I have met the people who bear the scars. I believe, nonetheless, that this should not prevent us from looking into the merits of this principle. We are in the process of commissioning an outside study and our experts in the European Corporate Governance Forum, about which we will hear more this afternoon, are already looking into this issue.
Ladies and Gentlemen, to conclude: I have posed a number of questions and only given a few hints on how I think they might be answered. Your job today is to help us formulate the answers. I would ask you to keep in mind the guiding principle that that our European companies need and deserve a modern and flexible company law framework. We must give it our best shot because they deserve no less. Thank you very much for your attention.
