Corporate Governance (CG) in Europe

Arif Hartono, SE. MHRM. PhD.

European Phenomena

Declining the barriers of capital markets with the adoption of Euro The internationalization of cross-borders portfolios Technological advance CG becomes more important

Predominant Bord & Leadership Stucure

Member State Austria Belgium Denmark Finland France Germany Greece Ireland Board Struture Two-tier Unitary* Two-tier Unitary* Unitary* Two-tier Unitary* Unitary Employee role in supervisory body Yes No Yes Articles may provide Articles may provide (and advisory) Yes No No

Predominant Bord & Leadership Stucure

Member State Italy Luxembourg Netherlands Portugal Spain Sweden UK Board Struture Unitary** Unitary Two-tier Unitary** Unitary Unitary Unitary Employee role in supervisory body No Yes Advisory No No Yes No

*Other structure also available **Board auditors also required

Supervisory & Management Board

Supervisory Board Members are elected by shareholders; members are nominated by employees Controls the direction of the business Oversees the provision of information & that appropriate system have been put in place by the management board Management Board Members are appointed by the spervisory board

Manages the business

Provides various financial infor mation of appropriate systems e.g. a risk management system

Germany
Features Main business form Key Characteristic Public or private companies limited by shares Financial & non financial companies Civil law Dual Compulsory employee representation on supervisory board

Predominant ownership Legal system Board structure Important aspect

Germany The Cromme Code

Shareholders & the general meeting Cooperation between the management & the supervisory board Management board Supervisory board Transperancy Reporting & audit of the annual financial statements
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Denmark
Features Main business form Key Characteristic public or private companies limited by shares Institutional & foundation ownership Civil law Dual Many shares have multiple voting ri rights
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Predominant ownership Legal system Board structure Important aspect

Denmark Norby Committee

The role of shareholders & their interaction with the management of the company The role of the stakeholders & their importance to the company Openness & transperancy The task & responsibilities of the supervisory board Composition of the supervisory board Remuneration of the members of supervisory board & the executive board Risk management Audit

France
Features Main business form Key Characteristic Public or private companies limited by shares States, institutional, individual Civil law Unitary (but other structure possible) Many shares have multiple voting ri rights

Predominant ownership Legal system Board structure Important aspect

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France Bouton Report

Role & operation of the board directors Board directors composition Evaluation of the board directors The audit committee Compensation committee Nominating committee Social & environmental issues
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Italy
Features Main business form Key Characteristic Limited liability companies; partnership non-financial/holding companies; families Civil law Unitary Board of auditors required

Predominant ownership

Legal system Board structure Important aspect

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Italy The Preda (2) Report

Role of the board directors Composition of the board directors Independent directors The chairman of the board of the directors Information to be provided to the board of directors Confidential information Remuneration of directors Internal control Transaction with related parties Relations with institutional investors & other shareholders Shareholders meetings Members of the board of auditors
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Concluding remark

There seems to be a concensus on certain key issues in European CG; e.g. More transperancy & disclosure, accountability of the board, & the independence of at least a portion of the directors

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