The European Commission (EC) has
launched a public consultation to help improve the corporate
governance of European companies.

Following the financial crisis, corporate
governance has been based on self-regulation and has not been as
effective as it could have been, according to the EC.

The consultation addresses a number
of issues including how to improve the diversity and functioning of
the boards of directors, monitoring and enforcement of existing
national corporate governance codes and how to enhance the
engagement of shareholders.

The consultation aims to focus on how
companies, not just financial institutions, work, according to EC
Internal Market and Services commissioner Michel Barnier, who said
“too much short term thinking has had disastrous consequences.”

“In the current economic situation, we need more
than ever to ensure that companies are well governed and
consequently reliable and sustainable,” he said.

The lessons of the crisis will lead to
better supervision of financial institutions, stronger banks and
effective systems to resolve failing institutions, he added.  

In its response to the consultation, the
Institute of Chartered Accountants for England and Wales’ (ICAEW)
head of corporate governance, Vanessa Jones, said:

“The Green Paper will open up a debate
on a European mechanism to help issuers identify their
shareholders in order to facilitate dialogue between issuers and

“Good governance is important to all
organisations but one size does not fit all and caution is needed
for any developments that may stifle competitiveness of
European markets.”

The deadline to respond to the
consultation is 22 July. The EC said it will carefully examine all
replies and issue a feedback statement summarising the results of
the consultation later this year.