Best practices and better laws: Corporate governance codes in the member states of the European Union (original) (raw)

Asked about the nature of the "Tabaksblat" Code, the Dutch Minister of Justice, J.P.H. Donner, replied, "De Code-Tabaksblat is zo'n interessant verschijnsel, omdat dat ook geen wetgevend instrument is."; In this sentence Donner said much about the character of a national code of corporate governance. First, the Dutch corporate governance code is not a legal instrument, and second, it is a "versehijnsel", which translates into "appearance". This is revealing in the sense that it is more difficult to explain what a corporate governance code is than to describe what it looks like. The most detailed comparative study that treats corporate governance codes in Europe describes a corporate governance code as "a systematically arranged set of principles, standards; best practices and~or recommendations, precatory in nature that is" neither legally not" contractually binding, relating to the internal governance of corporations (covering topics such as the treatment of shareholders, the organisation and practices of" (supervisory) boards and corporate transparency), and issued by a collective body.'"-This description can be regarded as narrow, since it excludes texts that are not arranged as a set of principles but could affect corporate governance practice, such as the methodology and criteria of corporate governance rating services. 3 On the other hand, the description also appears to be broad, because it does include texts that are published by bodies that pursue particular interests, for example the corporate governance principles of Hermes Pensions Management Ltd., a large institutional fund manager. 4 This paper will take a narrow perspective and focus on codes that claim nationwide authority within a Member State of the European Union. This approach reflects the policy of the European Commission that each Member State should have a code "designatedJor use at national level".s It seems, however, that recently the European Commission has altered its concept of a "national This article is the transcript of a speech delivered on 7 March 2005 at a conference on "+Corporate Governance: Legal Consequences for Europe and the US". organised by the Academy of European Law (ERA). "" D~: Bj6rn Fasterling, LL.M. is professor of law and head of the law department at EDHEC Business School (Grande Ecole), Lille/Nice. ' Interview with the Dutch Minister of Justice J.RH. Donner. Ondernemingsrecht 2004, p. 2. ~-Weil / Gotshal / Manges, Comparative Study of Corporate Governance Codes Relevant to the European Union and its Member States+ 2002, p. 11. The study identifies 35 codes meeting this description. The number has increased since the publication of the study in January 2002 and taking the access of the new EU Member States into account. Following the description of Weil, Gotshal and Manges. one could count another 22 codes for the EU, see list under http://www.ecgi.orgJcodes/all\_codes.php (accessed 14 March 2005). For an example see Standard & Poor's Rating Services Code of Practices and Procedures, downloadable at http:••www2.standardandp••rs.c•m/spf/pdf/pr•ducts/Fu•••ub•icCriteria•7Ju•y•32.pdf