Corporate Governance is an international matter. This is seen especially with the current initiatives by many countries around the world to investigate the reasons for the global economic crisis and to identify how to avoid them in the future. . Topics like diversity, board member education and board effectiveness are discussed in many industrial nations as well as on regional and global level.
Taking a look at corporate governance developments in other countries is not only interesting for those responsible for corporate governance in multinational companies. German corporate governance rules and regulations tend to follow global trends, so that taking a look at a global level can indicate further developments in the German corporate governance landscape.
This page provides an overview of the corporate governance landscapes and developments in 5 regions: the EU, the US, Asia, Latin America and Russia. When going through the information on international governance herein, please bear in mind that most companies in Germany have implemented a dual board system, meaning that boards of directors are divided into two tiers: a management board (called the Vorstand) which is solely responsible for the management of the company, and a supervisory board (called the Aufsichtsrat), which is charged with overseeing the activity of the management board. A one-tier system is commonly found in other countries.
In its communication dated 4 March 2009, the Spring European Council of the European Commission that is driving European Recovery announced that it would:
(i) as a matter of urgency, address the impropriety of the remuneration framework in the financial sector with a view to curb excessive risk-taking and short-termism, and
(ii) as a second step, examine more broadly and report on current corporate governance practices in financial institutions, making recommendations for legislative initiatives, where appropriate.
These announcements are based on the recommendations of an expert group led by Jacques de Larosière regarding the future regulation and supervision of European Financial Markets.
Strengthening Corporate Governance is the key factor of the European Commission’s program to reform the Financial Markets and to avoid future crisis. In this context, the European commission is publishing a series of Green Papers to stimulate a public discussion on potential steps to be taken. It remains to be seen which concrete measures will be taken based on the results of this discussion.
Corporate Governance in Financial Institutions and Remuneration Policies
On June 2, 2010, the European Commission has published the first part of the series of Green Papers under the title of “Corporate Governance in Financial Institutions and Remuneration Policies”. The Green Paper applies in principle to all financial institutions (especially banks and insurance companies), independent of stock market listing.
This Green Paper should be read in conjunction with the Commission Staff Working Paper
(COM(2010) XYZ) 'Corporate governance in financial institutions: the lessons to be learnt
from the current financial crisis and possible steps forward'. This document provides an overview of the situation.
Contributions were due to the Commission by September 1, 2010 . A summary of the contributions made can be found here.
> View PDF (Green Paper)
Audit Policy: Lessons from the Crisis
On October 13, 2010, the European Commission published a Green Paper under the title „Audit Policy: Lessons from the Crisis”. This consultation has opened a debate on the role of the auditor, the governance and the independence of audit firms, the supervision of auditors, the configuration of the audit market, the creation of a single market for the provision of audit services, the simplification of rules for Small and Medium Sized Enterprises (SMEs) and Practitioners (SMPs) and the international co-operation for the supervision of global audit networks.
Contributions were accepted until December 8, 2010.
On 9 and 10 February 2011, the European Commission held a high-level conference on accounting and auditing issues.
On September 13, 2011 the European Parliament issued a resolution on the content of the Green Paper.
On November 30, 2011, the European Commission released a proposal for a regulation on the quality of audits of public-interest entities and a proposal for a directive to enhance the single market for statutory audits.
> View PDF (Green Paper)
> View Commission Proposals
> Download PDF (Special Issue Corporate Governance Forum)
The EU corporate governance framework
The European Commission has adopted a Green Paper on European corporate governance which launches a public consultation on options to improve existing corporate governance mechanisms. The Green Paper contains three chapters: boards, shareholders and the comply-or-explain principle. It allows all interested parties to see which areas the Commission has identified as relevant in the field of corporate governance. It is also an opportunity for the public to express their views on the questions raised, and to provide any relevant material. The period of consultation ended on July 22, 2011.
Modernisation of Company Law and Enhancement of Corporate Governance
On February 20, 2012, the European Commission has launched an in-depth consultation on the future of European company law. It's aim is to see whether today's needs are still met by the existing legal framework. An on-line public consultation paper has therefore been launched to collect comments from all stakeholders. The deadline for sending contributions was 14 May 2012.
In 2011, the Commission issued a similar public consultation in the field of corporate governance. Both policy fields are closely linked as some corporate governance rules are enshrined in company law, and company law deals to a large extent with corporate governance issues. Thus, for the sake of coherence, any possible follow-up initiatives in these two fields would be announced jointly in the second half of 2012.
On December 12, 2012, the European Commission has adopted an Action Plan outlining future initiatives in the areas of company law and corporate governance. On the basis of its reflection and the results of the consultations, the Commission identified several lines of action in the area of company law and corporate governance that are fundamental to putting in place modern legislation for sustainable and competitive companies.
Dodd-Frank Wall Street Reform and Consumer Protection Act
On June 30, 2010, and July 15, 2010, the House of Representatives and the Senate, respectively, passed the Dodd-Frank Wall Street Reform and Consumer Protection Act. The bill was signed into law by President Obama on July 21, 2010.
Although the majority of the voluminous Dodd-Frank Act focuses on the regulation of financial institutions, there are also sections that address executive compensation and corporate governance provisions, which apply to a majority of U.S. publicly traded companies.
Executive Compensation & Director Elections
The new regulations address among others:
- Shareholder Advisory Vote (Say-on-Pay) on Executive Compensation
- Compensation Committee Independence
- Additional Disclosure of Executive Compensation in the Annual Proxy Statement
- Recovery of Erroneously Awarded Compensation
- Proxy Access
New regulations concerning Whistleblowing
The Dodd-Frank Act introduces new cash incentives for corporate employees to report suspected wrongdoing directly to the Securities and Exchange Commission (SEC) and significantly expands protection of whistleblowers from employment retaliation:
- The Dodd-Frank Act requires the SEC to pay whistleblowers rewards of between 10 percent and 30 percent of monetary sanctions that aggregate to at least US $1 million as a result of government enforcement actions based on information provided by one or more whistleblowers.
- It significantly expands anti-retaliation employment protections and remedies for whistleblowers.
> Download PDF (summary of new regulations)
(posted with permission of Latham & Watkins LLP)
On this page, the SEC publishes the current implementation status of the Dodd-Frank Act:
Implementing the Dodd-Frank Wall Street Reform and Consumer Protection Act
You can find further information on the recent reforms here.
The 2011 European Corporate Governance report addresses behavioural issues as opposed to the structural/process challenges in boardrooms today not only by providing a measured picture of the rising corporate governance standards in Europe but by sharing qualitative insights into effective leadership within the boardroom.
This biennial report provides you with quantitative data collected and analysed on 400+ publicly-listed companies from 15 countries.
> View Report
This report looks at the institutional framework of corporate governance in China through the prism of the OECD Principles of Corporate Governance. By assessing a broad range of laws, regulations and codes, it provides a valuable reference for understanding how much has been achieved in Chinese corporate governance and the main ambition of future reform efforts.
> View PDF
The Research Paper “Corporate Governance in the Asian Countries” published by the School of Management, New York Institute of Technology (NYIT), analyses the status and the development of Corporate Governance in 10 Asian countries. According to the paper, the Corporate Governance landscape has improved to some extent in the Asia region, while some countries have made significant progress.
However, the paper comes to the overall conclusion that Corporate Governance in Asia currently remains as a work-in progress.
The document “Best Practices in Asian Corporate Governance”, published by the Asian Productivity Organization, includes country reports on the Corporate Governance in China, India, Japan, Malaysia, the Philippines, Singapore and Vietnam as well as a “Best Practice Benchmarking”.
> View PDF
The research paper “Corporate Governance - A Survey of Australian and South East Asian Systems”, published by the Bond University, Australia, analyzes the Corporate Governance systems in Australia, Indonesia, the Philippines, Thailand, Malaysia, Vietnam and Singapore.
> View PDF
CLSA Asia-Pacific Markets (‘CLSA’), Asia’s leading, independent brokerage and investment group, has released its Corporate Governance (CG) Watch 2010, the 8th survey of corporate governance in Asia since 2000. Produced in collaboration with the Asian Corporate Governance Association (ACGA), the report examines 580 Asia-listed companies and 11 countries, including Japan, to produce the most comprehensive assessment of corporate governance performance, issues and trends in Asia.
Information on the impact of the credit crisis in Asia can be found on the following Presentation Slides prepared by the Asian Corporate Governance Association (ACGA):
> View PDF
The International Finance Cooperation, a member of World Bank Group, has issued a “Practical Guide to Corporate Governance: Experiences from the Latin American Companies Circle” in which it highlights the challenges, priorities and tangible benefits of adopting leading corporate governance practices in Latin America.
The web site ‘Corporate Governance in Russia’ provides an overview of the implemented framework of the OECD/World Bank - Russian Corporate Governance Roundtable. You can also find information on corporate governance and the protection of investors' rights in the Russian market.
Information on the Corporate Governance regulations in Russia are shown in the following Q+A Guide „Corporate Governance and Directors’ Duties 2010“ by the Russian law firm Salomons:
> View PDF