ECGI: Paper on Corporate Governance

03 March 2004

The European Corporate Governance Institute (ECGI) published a paper considering the regulation of executive pay practices in listed companies in the European Union. The analysis is placed in the context of the dispersed ownership/blockholding ownership faultline which runs across EU corporate governance, and in light of recent EU initiatives, particularly the Commission's May 2003 Company Law Action Plan.

The report states that a shift to more pervasive equity ownership across the EU may bring the problems currently associated with pay practices in dispersed ownership systems. The governance and disclosure matrix proposed by the Commission's Company Law Action Plan to address the conflicts of interests inherent in executive pay setting may, therefore, be important as a precautionary measure.

The Action Plan's executive pay proposals also reflect the growing convergence among Member States, on both sides of the governance faultline, as to the importance of full, individualized disclosure of executive pay and of the remuneration committee in managing conflicts of interests in the executive pay process.

Paper

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