Second high level policy dialogue among representatives of Corporate Governance Code Oversight Authorities from Europe and Emerging Markets took place in Brussels on December 8, 2010, at the local office of the Confederation of Finnish Industries. It was organized by the Global Corporate Governance Forum and the UK Financial Reporting Council (FRC). The participants discussed the monitoring and enforcement mechanisms for CG Codes implementation.
This report (download pdf) summarizes discussion that took place.
Some key points highlighted in the discussions included:
1. While national regulators and international standards setters were continually seeking to tighten rules and regulations, especially following the global financial crisis, the very practical issue of proper supervision and enforcement of these standards remains an area for concern especially with the increasing complexity of some of these requirements and the necessary skills and capacity constraints this imposes on regulatory authorities.
2. As might be expected, there was no common standard model for regulators and stock exchanges to follow in building the necessary regulatory and supervision capacity nor was there any easy balance between mandatory and so-called self-regulatory requirements. However, it was emphasized that the role of institutional investors in actively engaging with companies in an informed way remained both a source of concern and a source of tension with regulators in some markets.
3. In emerging markets, particularly, the stock exchange would often find themselves assuming a greater role in enforcement and supervision in the absence of weak regulatory capacity. This also leads to problems with regulatory arbitrage by market participants seeking to avoid tighter CG Code provisions supervised by stock exchanges.
4. The view was that institutional investors predominantly focused on board-related matters especially the quality of directors (not just independence), followed by issues of executive compensation and take-over mechanisms, although in many emerging markets the level of shareholder engagement where it took place largely rested with international investors and not so much with domestic investors.
5. The FRC related its experiences with CG Code development emphasizing the challenges of setting rules with acknowledged costs for compliance and the difficulty of simultaneously quantifying the "benefits" to the market. It also emphasized the need to co-ordinate CG Code rules within the overall regulatory framework of the country to avoid contradictory requirements being imposed on market participants as highlighted by some of the workshop discussants.
Copies of the presentations and other discussion documents may be found below.
Summary report
Agenda
List of participants
Measuring Success: Implementation and Monitoring Tools. Christian Strenger, Member of the German Corporate Governance Commission and Member of Forum Private Sector Advisory Group.
The Stockholm Stock Exchange Monitors Application of the Code. Per Lekvall, Swedish Corporate Governance Board.
Evaluating the Impact of Potential Code Changes. Chris Hodge, Financial Reporting Council, United Kingdom.
What Happens Once the Code is Finalised: Different Enforcement Mechanisms:
For more information, please contact Jose Cruz-Osorio
This report (download pdf) summarizes discussion that took place.
Some key points highlighted in the discussions included:
1. While national regulators and international standards setters were continually seeking to tighten rules and regulations, especially following the global financial crisis, the very practical issue of proper supervision and enforcement of these standards remains an area for concern especially with the increasing complexity of some of these requirements and the necessary skills and capacity constraints this imposes on regulatory authorities.
2. As might be expected, there was no common standard model for regulators and stock exchanges to follow in building the necessary regulatory and supervision capacity nor was there any easy balance between mandatory and so-called self-regulatory requirements. However, it was emphasized that the role of institutional investors in actively engaging with companies in an informed way remained both a source of concern and a source of tension with regulators in some markets.
3. In emerging markets, particularly, the stock exchange would often find themselves assuming a greater role in enforcement and supervision in the absence of weak regulatory capacity. This also leads to problems with regulatory arbitrage by market participants seeking to avoid tighter CG Code provisions supervised by stock exchanges.
4. The view was that institutional investors predominantly focused on board-related matters especially the quality of directors (not just independence), followed by issues of executive compensation and take-over mechanisms, although in many emerging markets the level of shareholder engagement where it took place largely rested with international investors and not so much with domestic investors.
5. The FRC related its experiences with CG Code development emphasizing the challenges of setting rules with acknowledged costs for compliance and the difficulty of simultaneously quantifying the "benefits" to the market. It also emphasized the need to co-ordinate CG Code rules within the overall regulatory framework of the country to avoid contradictory requirements being imposed on market participants as highlighted by some of the workshop discussants.
Copies of the presentations and other discussion documents may be found below.
Summary report
Agenda
List of participants
Measuring Success: Implementation and Monitoring Tools. Christian Strenger, Member of the German Corporate Governance Commission and Member of Forum Private Sector Advisory Group.
The Stockholm Stock Exchange Monitors Application of the Code. Per Lekvall, Swedish Corporate Governance Board.
Evaluating the Impact of Potential Code Changes. Chris Hodge, Financial Reporting Council, United Kingdom.
What Happens Once the Code is Finalised: Different Enforcement Mechanisms:
- Case of Brazil, Dilma Eguchi, BM&FBovespa.
- Case of Colombia, Corporate Governance Oversight and Enforcement" (in Spanish language) Ms. Jeannette FORIGUA ROJAS, Superintendente Delegada para Emisores, Superintendencia Financiera de Colombia.
- Case of Ireland, Daryl Byrne, Irish Stock Exchange.
For more information, please contact Jose Cruz-Osorio
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