Mazars, and ecoDa, the European Confederation of Directors’ Associations, have published the results of a survey of directors which looks into the practices of European listed companies in designing their corporate governance structures and disclosing their corporate governance practices, including the application of the ‘comply or explain’ concept.
The results highlight a number of issues for review that are linked to the promotion of the long-term sustainable success of listed businesses.
Key findings include:
83% of companies surveyed had revised their corporate governance model in the last financial year mainly as a result of changes in the corporate governance code they were applying or in European Union or national law. Of companies not revising their code, family- owned companies were in the majority.
76% of board members considered corporate governance was of interest to their shareholders though almost a quarter (the remaining 24%) did not believe their shareholders were really interested in governance matters. The main topics discussed with investors were remuneration (40%) and the nomination of board members (40%).
59% of companies surveyed had made use of the flexibility provided by the ‘comply or explain’ approach. Just under half of boards (48%) think additional guidance on ‘comply or explain’ would be helpful to promote high quality explanations, offer clear guidelines or to provide more information on best practice
Commenting on the survey report, Lutgart Van den Berghe, Board member of ecoDa said ‘Board members, investors and regulators all have their part to play in fostering an ecosystem that promotes long-term sustainable success for the benefit of all stakeholders in listed companies and wider society. Targeting full compliance will not, in itself, raise the bar higher for effective corporate governance.”
Maria Cabodevilla, Partner at Mazars added ‘More emphasis should be placed on how boards are operating in the real world and not just on paper. Building an engaged board with high levels of both support and challenge for the executive team requires constant attention but is crucial if the businesses the boards are leading are to achieve their full potential.”’
Setting the right corporate tone from the top is seen as by far and away the most effective way to influence the culture in today’s businesses. Lead by example, and others will follow that lead. But research among European company board directors reveals that this belief is not being reinforced by action on how their businesses behaves.