Winter unveils corporate governance vision

Date: 07/11/02

By Karen Carstens

JAAP Winter was a popular visitor to Brussels this week: the EU's 'wise man' on company law came to town to present an eagerly awaited report on tough new corporate governance rules aimed at nipping Enron-style scandals in the bud.

'We do not believe the EU should set up one single code of corporate governance,' Winter said. 'But the Commission should coordinate efforts among member states and look into how to enforce compliance.'

The proposals put forward by Winter, a Rotterdam-based academic and legal adviser to Anglo-Dutch food and soap giant Unilever, stop short of an EU-wide binding corporate governance law similar to the United States' Sarbanes-Oxley Act.

Frits Bolkestein, the single market commissioner, who ordered the report, said: 'This is part of the Commission's genuine concern to have a modern regulatory framework for company law in Europe, and that concern pre-dates the Enron scandal.'

Winter chaired a seven-strong group of experts that produced the 161-page document, which was also presented to the Ecofin Council on Tuesday (5 November).

Bolkestein lauded the group's 'comprehensive and creative solution to the future of European company law'.

The Winter report contains detailed recommendations on corporate governance, capital formation and maintenance, corporate restructuring and mobility, the European Private Company and Cooperatives and other forms of enterprises.

The guidelines include urging companies to disclose individual directors' salary and bonuses and allowing shareholders to discuss or vote on how they are calculated.

The group also recommends that the majority of audit committee members should be independent.

This would require changes in countries such as Germany and Spain, where companies are not obliged to publish the details of directors' salaries and bonuses.

But German Christian Democrat MEP Klaus Heiner-Lehne said he sees no major problems with the report for his or any other EU country, even if some corporate bosses in Germany might cringe if their salaries are suddenly revealed.

'These recommendations are a step in the right direction in the field of corporate law,' he said.

'Now they must be put into practice by the European Commission.'

Lehne added that he hopes the Commission will stick to the Winter group's guidelines, because they take 'European corporate culture' into account and do not use 'the American Sarbanes-Oxley Act as a point of reference'.

Winter said the general idea is to maintain and cultivate further flexibility, while at the same time facilitating cross-border business. A 'top-down' approach, with centralised rules overseen by the Commission, would probably have the opposite effect, he said, while warning that applying his recommendations will not necessarily prevent further cases like Enron.

This is because the people at the top of the US electricity giant had deliberately and repeatedly violated corporate laws.

'Our aim is to at least create a climate that prevents this kind of behaviour,' he said.

Bolkestein said the report will be discussed at a Competitiveness Council meeting (15 November) and at a 27 November meeting of the European Parliament's legal affairs and internal market committee.

The Commission aims to publish a communication on the report by early next year, he said.

'I'm sure this report will be read with great interest on both sides of the Atlantic because these issues are on the front burner everywhere,' Bolkestein added.

Jaap Winter, the EU's 'wise man' on company law, presented an eagerly awaited report on tough new corporate governance rules aimed at nipping Enron-style scandals in the bud, 5 November 2002.