The survey shows that the real challenge for corporate governance to work in any organisation lies in developing the right culture and behaviours. Delegates attending a major EU Corporate Governance conference, facilitated by the Department of Jobs, Enterprise and Innovation, as part of the Irish Presidency, were strongest in endorsing this view across a wide range of opinions canvassed in a special survey prior to the event.
The conference takes place at the Convention Centre in Dublin today and tomorrow 16 and 17 May. The event is supported by PwC, Arthur Cox and The Irish Stock Exchange. The survey was carried out by Amarach Consulting on behalf of the conference and its organisers.
An equally strongly-held view concerned the need to re-direct the focus of risk management: away from excessive risk avoidance in favour of pursuing worthwhile opportunities for expansion and growth.
Speaking at the survey launch, Richard Bruton T.D., Minister for Jobs, Enterprise and Innovation, said: “It is vital that we learn from past regulatory failings, so that at the EU and national levels we have a robust and fit for practice corporate governance regime. This regime must be effective but also meet the realities of the business world. It is crucial to strike the appropriate balance so we do not stifle innovation, entrepreneurship and job creation.”
“Given the huge potential of the EU Single Market to boost economic growth and create jobs, the Irish Presidency has prioritised the implementation of the outstanding pieces of Single Market legislation. Effective rules for company law and good corporate governance are essential for the efficient management of this Single Market.”
Also speaking at the survey launch, Bob Semple, Partner, PwC, said: “It’s hardly surprising that the focus in recent years has been on managing downside risk. But if we are to avoid excessive risk-avoidance, it will be essential to identify attractive opportunities for growth – whether in new markets or in new products and services. The right ‘Tone from the Top’ – one that promotes appropriate behaviours – will provide the leadership to pursue the right strategies.”
Delegates strongly endorse the view that corporate governance requirements in the EU, properly implemented, should stimulate competitiveness and growth. But opinion was sharply divided on whether corporate governance could be legislated for – whereas a clear majority (77%) believed that EU initiatives on Corporate Governance should aim at a new drive to encourage general adoption of best practices in all Member States. Delegates were also against forcing greater diversity in Boards (in terms of gender, geography, race etc) through mandatory minimum levels.
A large majority (82%) are of the view that the approach to corporate governance should be changed to prioritise substance over form and that that more meaningful disclosures specific to the company should replace boilerplate corporate governance reporting. This is consistent with the UK’s Financial Reporting Council’s views about the ‘fungus of boilerplate reporting’ and the desirability of more meaningful disclosure.
More transparency and shareholder influence on remuneration
Two-thirds of respondents agree that more transparency is needed concerning remuneration of individual directors. At the same time, a majority (64%) also agree that shareholders need more influence over remuneration policies and disclosures.
Finally, there was strong support (67%) for the view that the corporate governance role of Audit Committees should not be expanded without providing guidelines on minimum training for members of Audit Committees. Bob Semple added: “at a time when the expectations of Audit Committee Members have never been higher, it is timely to reflect on any unmet training needs”.
Brian O’Gorman, Managing Partner, Arthur Cox concluded: “Harmonisation of company law and corporate governance across Europe has been difficult to achieve. It was interesting to see that 48% of respondents to the survey believed that good corporate governance cannot be legislated for. This finding evidences a recognition amongst many that changing mindsets is harder than changing laws and that recommendations may be preferable to hard law in facilitating changes in corporate governance. By contrast, in relation to company law harmonisation, perseverance will deliver a significant prize for the EU if the barriers to cross-border operations can be removed, such as through the introduction of a Directive or Council Regulation to permit the transfer of seat between Member States.”