The European Commission is set to launch a review of corporate governance across the EU next month, and will be looking at whether the UK's codes of conduct for companies and investors, drawn up under the quasi-voluntary "comply or explain" principle, could be toughened or made to work better. The review will be kicked off with a Green Paper next month, Commission official Claire Bury told delegates at the National Association of Pension Funds' annual conference in Edinburgh.
Bury, who is head of the Commission's company law, governance and financial crime unit, said the review will cover three main areas.
The first area of investigation is the structure of company boards across the EU, including diversity - the number of women who sit on boards - directors' pay, and risk management.
It will also look at shareholder engagement, and how effective investors are at holding boards to account. Especially in the UK, shareholders' failure to keep a tight rein on executives such as Sir Fred Goodwin at Royal Bank of Scotland was perceived as a contributing factor to the financial crisis.
Bury said: "The UK Code is a useful development. But it focuses on the 'downstream' area - typically the relationship between company directors and shareholders' agents, usually fund managers. We would like to take a look further 'upstream', at the relationship between pension funds and their fund managers."
Lastly, it will also examine the EU's own governance legislation, and the principle of "comply or explain" itself. According to this very Anglo-Saxon concept, companies should aspire to comply with all the requirements of the code. But if they cannot or do not wish to, they can explain why not.
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