Comparative Study Of Corporate Governance Codes Relevant to the European Union And Its Member States

Abstract

Rules and norms of corporate governance are important components of the framework for successful market economies. Although corporate governance can be defined in a variety of ways, generally it involves the mechanisms by which a business enterprise, organised in a limited liability corporate form, is directed and controlled. It usually concerns mechanisms by which corporate managers are held accountable for corporate conduct and performance. Corporate governance is distinct from -- and should not be confused with -- the topics of business management and corporate responsibility, although they are related. Over the past decade, interest in the role that corporate governance plays in economies, and particularly in capital markets, has increased in the European Union and its Member States. The adoption of a common European currency, the freer flow of capital, goods, services and people across EU borders, the competitive pressures of globalisation, the realisation of new technologies, privatisation of state-owned enterprises, the growth and diffusion of shareholding, and increased merger activity among large European corporations -- and among Europe’s largest stock exchanges -- all create tremendous interest on behalf of European issuers and investors, Member States and the European Commission in understanding the commonalities and differences between national corporate governance practices, and any related barriers to the development of a single EU capital market. The purpose of this Comparative Study is to further the understanding of commonalities and differences in corporate governance practices among EU Member States through an analysis of corporate governance codes and -- to a limited extent -- relevant elements of the underlying legal framework. This Study identifies and compares existing corporate governance codes in the fifteen EU Member States and other corporate governance codes that may affect the operation of companies within the European Union. As explained in greater detail below, for purposes of this Study, a “corporate governance code” is generally defined as a non-binding set of principles, standards or best practices, issued by a collective body, and relating to the internal governance of corporations. 1