Shareholders set to gain under Bolkestein disclosure proposal

By Imre de Roo

Date: 07/10/04

THE European Commission will put forward proposals on 20 October to increase information and disclosure about the structure of groups of companies and intra-group relationships.

Internal Market Commissioner Frits Bolkestein wants to make board members collectively responsible for the contents of the annual report and annual accounts of their company.

The proposals will be made as suggested amendments to the existing 4th and 7th company directives and will require the approval of the Council of Ministers and the European Parliament.

According to the proposals, the companies' annual reports should include a statement on which corporate governance code they adhere to.

Bolkestein is also requesting more transparency about off-shore activities, to force companies to provide full disclosure of all their worldwide activities.

The proposals, to be approved by the commissioners as a written procedure, complement other measures to improve corporate governance taken this week (8 October).

The Commission announced non- binding recommendations on the role of independent directors and executive remuneration as a step to combat corporate malpractices.

The EU executive is recommending to member states that they ensure listed companies provide more openness in corporate remuneration policy: companies should disclose individual directors' pay and outline the remuneration policy.

Bolkestein said: "There is a conflict of interest when executive directors take part in setting their own pay. Shareholders should be better informed - they are the company, not the management."

The Commission also recommended that the remuneration policy should be on the agenda at the annual shareholders' meeting. The shareholders should also be allowed more say in share or share- option schemes for directors.

The Dutch commissioner called on companies to ensure an "appropriate balance of executive/managing directors and non-executive/supervisory directors" to avoid one group dominating decision-making.

The directives and recommendations are part of an action plan to modernize company law and corporate governance that was adopted last year.

The measures aim to improve trust in European business following scandals such as the collapse of Italian dairy firm Parmalat and the difficulties of the Dutch firm Ahold.

• Imre de Roo is a Brussels-based freelance journalist.

Preview of European Commission proposals to be put forward on 20 October 2004 to increase information and disclosure about the structure of groups of companies and intra-group relationships.

European Commission: DG Internal Market: Company Law & Corporate Governance http://ec.europa.eu/comm/internal_market/company/index_en.htm

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