By Martin Banks - 6th June 2012
We will very carefully consider all the responses
A senior European commission official has confirmed that the executive will table an 'action plan' on corporate governance later this year.
Speaking in parliament on Wednesday, Ugo Bassi, of the commission's internal market and services directorate-general, said the package is partly designed to improve the "accountability and responsibility" of financial institutions.
He was speaking at a special debate on the issue, organised by The Parliament Magazine and the European Confederation of Institutes of Internal Auditing (ECIIA).
The commission's green paper on corporate governance in financial institutions says that "although corporate governance did not directly cause the crisis, the lack of effective control mechanisms contributed significantly to excessive risk-taking on the part of financial institutions".
In light of this, Bassi said both the commission and European parliament have looked at measures to strengthen the corporate governance regime in Europe.
Along with its green paper the commission, he said, has concluded a company law review through its specific reflection group task force, and launched another public consultation on measures which should be taken to strengthen corporate governance.
Bassi said the commission was currently "taking stock" of the results of its consultation exercise but that he regarded transparency as the "key" element to improving corporate governance.
He said, "We have received a large number of replies to our consultation which is the last phase of what has been a long reflection on this issue.
"The plans are still in the making so I cannot go into too much detail but it is all about getting the balance right. We have to look at those areas where we might need to regulate and then decide whether that should be self regulation, national or regulation at EU level."
"Some member states, let's remember, are jealous of their competences in this area while, on the other hand, enterprises believe that they are best placed to address the issue of regulation."
"We will very carefully consider all the responses and plan to adopt an action plan in October. This will seek to identify areas where the commission believes EU legislative initiatives could be tabled and those areas which might be left in the hands of national regulators."
Another speaker, Carolyn Dittmeier, president of the ECIIA, pointed to a survey conducted by her organisation on 'corporate governance codes' in place in member states.
One of the results, she said, was that as a consequence of the financial crisis many companies have slashed resources in their internal audit departments.
The Rome-based official said that internal audit "should be at the heart" of the governance process.
"This is not a case of special pleading. It is a case of board assurance and responsibility. Internal auditors are specialised in control and accountability and time and again, their work shows that weak governance can arise where duties are excessively combined or when they are partially duplicated."
"With poor segregation or duplication it is never clear who is truly responsible and poor governance thrives in that kind of confusion," she said.
Carmine Di Noia, deputy director general at Assonime, called for an "EU-wide approach", including possible binding legislation, to tackling the issue of corporate governance.