03 APR 2011
By Geoff Ho | Sunday Express
BRUSSELS is poised to unveil a European version of Sarbanes-Oxley, the notoriously strict US corporate governance laws that were enacted in the wake of the Enron and WorldCom scandals.
The European Commission (EC) is expected to publish a Green Paper on Tuesday, which will set out the company law reforms it wishes to see member states pass. The EC is expected to launch a consultation on the proposals shortly after.
It is thought that the Green Paper will include measures to boost transparency, increase diversity at firms and the number of women in senior positions, limit executive pay and bar individuals from acting as both chairman and chief executive of a company. The proposals, if passed, would apply to every company listed in London and every other European stock market.
City experts fear that the Green Paper will be a European equivalent of Sarbanes-Oxley and it could drive companies away from Europe and to more business-friendly jurisdictions in Asia, such as Hong Kong.
Critics of Sarbanes-Oxley claim that its 2002 introduction led to several American and foreign firms cancelling their US flotations and moving to London, damaging New York’s position as a global financial centre in the process.
One leading fund manager said that based on the EC’s previous criticism of the banks’ corporate governance arrangements, the Green Paper is likely to be “granular and prescriptive” on issues such as gender and how companies are run.
He added: “What we would hate to see happen is if some things become hardwired into legislation that would have unintended consequences.”
It is also believed that Brussels will remove a clause in Britain’s existing corporate governance regime which allows firms to avoid complying with best practice and regulations, provided that they explain the reasons behind their actions to investors.
New York mayor Michael Bloomberg and other critics argue that that Sarbanes-Oxley is expensive to comply with, too prescriptive and stifles investment in small companies.
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