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EuropeanIssuers responded to the European Commission’s public consultation on Corporate Reporting – improving its quality and enforcement.
EuropeanIssuers considers that EU legislation is overall effective and ensures that the pillars supporting the quality of corporate reporting are robust, and do not require additional intervention from the European legislator. The priority is to finalise and implement current on-going EU initiatives with a particular focus on not overloading issuers with additional reporting needs, adequacy of the material aspects of the reporting and coherence with existing EU law.
EuropeanIssuers Secretary General Florence Bindelle expressed: “The quality of corporate reporting in Europe is satisfactory as it stands. Companies do not see the added value in further legislative measures, which could, in turn, only risk to overburden them and allow for a proliferation of inconsistent and incoherent rules. Nevertheless, a more harmonised approach is necessary on rotation periods and non-audit-services to ease the process of mandating auditors for companies operating cross border. Also changes are needed to better take into account the specific situation of international group in case of acquisitions a simplified audit content for small and micro companies. Some other EU initiatives (CSRD and ESAP Regulation) could in turn contribute to enhance quality and ease access to the information disclosed by companies.”
Focusing on the existing framework, EuropeanIssuers put the accent on some aspects that present problematic features. Firstly, the Audit Reform has extended the responsibilities of audit committees and of companies, introduced more complexity and increased indirect costs without significant impact on the quality of audit or the audit market concentration. Secondly, several options left to Members States in the Audit Regulation have reduced its effectiveness, especially in cross border situations. Thirdly, as the Corporate Sustainability Reporting Directive (CSRD) proposal will introduce new reporting requirements on governance of ESG policies that will be redundant with existing requirements, it could be envisaged to propose targeted amendments to existing legislation, in order to improve efficiency of the framework.
EuropeanIssuers also stated its disagreement with regards to three features of Corporate Reporting. First, the establishment of indicators to assess the quality of corporate reporting and statutory audits, as it would raise issues in terms of methodology and interpretation. Second, joint audit, as it will neither improve audit quality nor will it be cost effective. Third, the supervision of audit committees, which would constitute a fundamental change to supervision and would go far beyond what is efficient or necessary.
With regards to corporate governance, EuropeanIssuers considered that the responsibilities and liability of boards as well as the rules applicable to audit committees regarding their tasks, composition and functioning are effective in ensuring high quality of corporate reporting, thus not requiring further legislative action. In particular, companies insist on the fact that potential sanctions on board members should not be strengthened to avoid scaring would-be directors from sitting on boards of public interest entities. Finally, rules regarding corporate governance should first rest on national provisions considering that they are closely linked to provisions of national laws and practices.
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