Directors & board members
Directors have a crucial role in corporate governance, ensuring proper management of the company and looking after investors' interests.
Directors' duties & liability
In April 2013 the Commission published an external study on directors’ duties and liability, as reflected in national law. This could serve as a basis for future regulatory steps in this area.
Directors' role in listed companies
Recommendation 2005/162/ECdeals with the role of non-executive or supervisory directors in listed companies. It:
- lays down rules on the independence of directors
- recommends that companies set up committees on the (supervisory) board to deal with:
- audit issues.
Directive (EU) 2017/828 amending Directive 2007/36/EC aims to encourage shareholder engagement, in particular in the long term. It introduces requirements in relation to identification of shareholders, transmission of information, facilitation of exercise of shareholders rights, transparency of institutional investors, asset managers and proxy advisors, remuneration of directors and related party transactions.
In April 2014 the European Commission presented:
- a proposal for the revision of the Shareholder Rights Directive (FAQ,Impact Assessment Executive summary,Impact Assessment, Citizens' summary ), to tackle corporate governance shortcomings related to the behaviour of companies and their boards, shareholders, intermediaries and proxy advisors
timely access to relevant information on general meetings (see time limits per country)
easier proxy voting.
2013 – Commission discussions with stakeholders on increasing shareholder engagement .
Directive 2004/25/ECsets minimum standards for takeover bids (or changes of control) involving securities of EU companies. It aims to protect minority shareholders, employees and other interested parties.
Application of the takeover directive
- Public consultation on Long term and sustainable investment (Newsroom)
- Results of the public consultation on Long-term and sustainable investment
- Responses to the public consultation
Employee share ownership
The work in this area aims to encourage and make it easier for employees to own shares of their companies or participate in their profits, and for companies to offer such schemes to their employees, including on a cross-border basis.
- Study on the promotion of employee ownership and participation and its executive summaries (October 2014)
- Country profiles for EU-28, Norway, Turkey and the US developed as part of this study
- Conference on employee share ownership (30 January 2014)
Remuneration for board members is a key area where managers may have a conflict of interest and account should be taken of shareholder interests.
Recommendation 2009/385/EC(FAQ ) makes recommendations including:
- remuneration should be performance-based and promote a company's long-term sustainability
- companies should publicly disclose their remuneration policies
- the remuneration committee should be involved
- shareholders should be able to influence remuneration policy
- Recommendation 2009/384/EC(FAQ ,impact assessment , executive summary ). Remuneration for board members and risk-taking staff.
- Recommendation 2004/913/EC(FAQ , report on application ). It was the first Commission act on remuneration.
Proper disclosure of companies' corporate governance arrangements offers useful information to investors and reputational benefits to business.
In April 2014 the European Commission presented:
- Recommendation on the quality of corporate governance reporting by listed companies ('comply or explain')
EU legal framework
Recommendation 2014/208/EUon corporate governance reporting, especially explanations companies should provide for breaking governance codes (‘comply or explain’)
- See also – Study – Monitoring & enforcement in corporate governance (2009)
- made key changes to 4 EU accounting directives.
- established the rule of collective responsibility of the board (Article 20)
- introduced the obligation for EU listed companies to provide a corporate governance statement in their annual report, giving information on: governance codes, shareholder meeting and its powers, shareholders' rights, administrative, management and supervisory bodies and their committees, etc.
CRD IV package
Following the 2008 financial crisis, the EU has introduced binding rules on corporate governance and remuneration for credit institutions and investment firms, now reflected in the CRD IV package.
- effective risk management
- tasks, requirements and composition of the boards
- remuneration for executives and employees considered "material risk takers" –including a "bonus cap" (maximum ratio between variable and fixed compensation)
- disclosure related to corporate governance and remuneration.
Commission report on remuneration under the Capital Requirements Directive and Regulation (July 2016)
Under Article 161(2) of Directive 2013/36/EU the Commission carried out a review of the CRD/CRR remuneration rules.
- Commission Report on the assessment of remuneration rules under CRD/CRR (July 2016)
- Press release
- Commission Staff Working Document on detailed assessment of remuneration rules under CRD/CRR (July 2016)
- Commission Staff Working Document on evaluation of deferral and pay-out in instruments rules under CRD/CRR (July 2016)
- Public consultation on impacts of maximum remuneration ratio and overall efficiency of CRD IV remuneration rules (October 2015 – January 2016)
- Stakeholders Meeting - Fact-finding on remuneration under CRD/CRR (December 2015)
- External study on remuneration provisions under CRD/CRR (January 2016)
Commission report on the diversity of credit institutions' and investment firms' management bodies
Under Article 161(5) of Directive 2013/36/EU the Commission published a report on the diversity of credit institutions' and investment firms' management bodies, finding that overall there is still room to improve.