Harmonization Process for Effective Corporate Governance in the European Union: From a Historical Perspective to Future Prospects
| Published date | 01 March 2014 |
| Author | Veronique Magnier |
| DOI | http://doi.org/10.1111/j.1467-6478.2014.00658.x |
| Date | 01 March 2014 |
JOURNAL OF LAW AND SOCIETY
VOLUME 41, NUMBER 1, MARCH 2014
ISSN: 0263-323X, pp. 95±120
Harmonization Process for Effective Corporate Governance
in the European Union: From a Historical Perspective to
Future Prospects
Veronique Magnier*
In 2011, the European Commission launched a public consultation on
`the European Corporate Governance framework', reflecting the EU's
increasing concern about corporate governance issue s, and the
changes and reforms needed in the aftermath of the financial crisis.
The question raised is twofold: first, should new objectives be estab-
lished, and secondly, which of the various regulatory mechanisms, the
traditional unification/coordination tools or the more recent comply-
or-explain rule, would best fulfill these ob jectives? The article
discusses how the financial crisis has made the harmonization of
corporate governance more imperative, why the objectives of
corporate governance rules must be enlarged to preserve the interests
of companies as a whole, and which mechanism would best achieve
these changes. More specifically, it tackles the comply-or-explain rule
already widespread in Europe, discussing its major advantages and
flaws, as well as the efficiency of its control by national and European
market authorities.
INTRODUCTION
The financial crisis has affected corporate governance in such a way that
changes and reforms must be seriously considered at both European and
national levels. Corporate governance has long been kept in the `soft law'
area. So far, there has been very partial regulation or no regulation at all. At
the EU level, the Commission adopted a very cautious position and decided
not to regulate corporate governance. This is quite understandable as
corporate governance is a matter of conduct, of human behaviour, and it
95
*Institute for Law, Ethics, Patrimony, Paris Sud University, 54 Bd.
Desgranges, 92330 SCEAUX, Paris-Sud, France
veronique.magnier@u-psud.fr
ß2014 The Author. Journal of Law and Society ß2014 Cardiff University Law School
would not be pertinent to impose unified rules all over the EU, to regulate
such conduct. This e xplains why the Commi ssion has only draf ted
recommendations, so far.
But the global financial crisis may have changed our way of thinking.
Corporate governance, like most legal regimes, is a cultural phenomenon. At
the national level, we witness a proliferation of codes of good conduct or
good practice which, so far, remain a tool of self-regulation, drafted by the
very persons that must comply with it. In such a context, the Commission has
a duty to reflect upon the effectiveness of the existing corporate governance
framework for EU companies. It is for this reason that, in June 2010, the
Commission first launched a public consultation on its Green Paper,
`Corporate governance in financial institutions and remuneration policies',
1
followed by the Green Paper, `The EU corporate governance framework',
2
which is the subject of the present public consultation. Regardless of the
outcome, it reflects, at least, an increasing concern by the European Union
on corporate governance issues in the aftermath of the financial crisis,
possibly heralding a European regulation on corporate governance, leading
to some kind of harmonization in the near future. What can we expect the
new pattern to be?
The article will discuss how soft-law developments in member states will
shift European corporate governance and argue why it is pertinent that new
objectives be assigned to corporate governance at the European level. Of the
various mechanisms available to regulate corporate governance inside
Europe, namely, the traditional unification/coordination tools and more
recent ones such as the `comply-or-explain' rule, what would be the most
efficient in order to comply with these objectives?
Part one briefly details why the crisis has affected corporate governance
regulation in such ways that reforms are needed in the national and
transnational European contexts, a crucial factor that will undoubtedly go
further to specify European corporate legal culture and help set up a new
European corporate governance framework. At this stage, soft law, through
the proliferation of codes of corporate governance, seems to be the answer to
the crisis, more so than hard law and in spite of its lack of normative value.
Part two explores the theoretical basis for the legitimacy of new legal
objectives to corporate governance in Europe, that is, a stakeholder-oriented
objective, alongside its total absence from the traditional lexicon of
corporate governance theory. It examines how corporate governance history
completes this portrait of stakeholder-oriented public and private regimes
and of an extensive history of public participation in private corporate
96
1 European Commission Green Paper, `Corporate governance in financial institutions
and remuneration policies' (COM(2010) 284 final).
2 European Commission Green Paper, `The EU corporate governance framework'
(COM(2011) 164 f inal), at c.europa.eu /internal_mar ket/company/ docs/
modern/com2011-164_en.pdf>.
ß2014 The Author. Journal of Law and Society ß2014 Cardiff University Law School
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