The European Commission has launched a public consultation aimed to gather opinions over the ways in which corporate governance of European companies, i.e. the system by which they are managed and controlled, can be improved. In this process, the Commission wills to clarify issues such as the improvement of diversity in the boards of directors, the engagement of shareholders or the enforcement of existing national corporate governance codes. Interested parties may submit their contributions in response to the consultation by 22 July 2011.

The public consultation on the EU corporate governance framework launched by the European Commission aims to clarify the ways by which the mechanisms of corporate governance applied by European companies can be improved. It is based on the Green paper on the EU corporate governance framework adopted by the Commission which focuses in three main aspects, including the functioning and composition of boards, shareholders implication in corporate governance and the comply-or-explain principle.

The objective of the Green Paper is to provide for a broad debate on the issues raised and allow all interested parties to see which areas the Commission has identified as relevant in the field of corporate governance. It is also an opportunity for everybody to express their views on the questions raised, and to provide any relevant material.

Main elements covered by Commission's consultation on corporate governance

This consultation broadens the debate focusing on functioning of companies well beyond the financial sector. It addresses issues such as shareholder engagement, the quality of corporate governance statements, as well as the diversity in companies' boards of directors, an issue which as already been on Commission's focus regarding the participation of women in these corporate bodies.

• Functioning and composition of board of directors: questions addressed refer to their effective functioning and ensuring they are composed of a mixed group of people in terms of gender diversity, variety of professional backgrounds and skills as well as nationalities. Functioning of boards, namely in terms of availability and time commitment of directors are also under scrutiny as well as questions on risk management and directors' pay.
• Enhancing shareholders' involvement on corporate governance issues and the encouragement to take an interest in sustainable returns and longer term performance, as well as enhancement of minority shareholders protection. The consultation also seeks to understand whether there is a need for shareholder identification, i.e. for a mechanism to allow issuers to see who their shareholders are, and for an improved framework for shareholder cooperation.
• Improvement of monitoring and enforcement mechanisms for corporate governance codes existing at national level, in order to provide investors and the public with meaningful information. The Green Paper asks whether the explanations provided by non-complying companies should be more detailed and whether national monitoring bodies should have more say on companies' corporate governance statements.

This consultation represents one more step in Commission's effort to ensure that companies are well governed and are resilient if faced to a crisis situation. The consultation is open until 22 July 2011 and their results will be carefully examined by the Commission to decide whether legislative proposals are necessary in this regard.