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The European Commission Starts Consultation on Next Phase of Corporate Governance Plan

The European Commission has launched the second phase of its company law and corporate governance action plan by asking European stakeholders what needs to be done next. In a December 20, 2005 report in Accountancy Age, writer Paul Grant noted that the consultation, which runs until the end of March next year, intends to evaluate the overall aim and context of future priorities, the continued relevance of medium and long term measures and the value of modernizing and simplifying EU company law.The article quoted European Union Internal Market Commissioner Charlie McCreevy as saying: “The first implementation phase of the Action Plan has been a real success. Since May 2003, nearly all measures scheduled for implementation in the short term have been adopted or are in the process of adoption. But today's context is different from the one in which the action plan was adopted, and we need to make sure that it still provides the most efficient response to market needs. That is why we have launched this consultation. Expert input will be important in preparing the strategy for EU company law and corporate governance in the coming years. Our future action must ensure that EU businesses are properly run and competitive.'

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Putting the Sarbanes Oxley Act into Context

The Perspective of American Business Leadership from the Business Roundtable

 

Mr. Steve Odland, Business Roundtable Corporate Governance Task Force Chairman, gave a speech on August 25, 2005 to the FBI Corporate Fraud Training Conference on "Ethics, Corporations and Fraud." The speech in Boston provides a comprehensive overview of the approaches of this leading U.S. business organization, which represents the major corporations in the country, on business ethics in general, business school ethics education and, in particular, laws and regulations. (The Roundtable’s members are 160 chief executive officers of leading U.S. corporations with a combined workforce of over 10 million employees and $4 trillion in revenues.)

Some U.S. business organizations have been characterized in the U.S. media at times as claiming that governance regulation has gone too far and that it is time to roll-back. Mr. Odland’s speech provides context and in-depth explanation.

In his speech he noted that, “I’m convinced that effective corporate governance – free from conflicts of interest, corruption and unethical behavior – is essential for the long-term success of any business.” He pointed out that, “Three years later (after formulation of voluntary ethics standards by the Roundtable), we can say that the reforms are working. Many Roundtable member corporations had already adopted reforms in advance of regulations or since have gone beyond required standards – to fundamentally change how we govern ourselves and conduct business. …To measure the results, the Roundtable has regularly surveyed our members and found widespread acceptance. For example, today:

Eight in 10 of our Business Roundtable members have boards that are three-quarters or more independent.

    • All of them have closed meetings of independent directors without the CEO present.
    • Nine out of 10 of our members reported increased involvement by the board of directors, especially by directors on audit, compensation and nominating committees.
    • Even though not required by law, over half our members have an independent chairman, lead director or presiding outside director.
    • And nine out of 10 companies have established procedures for shareholders to communicate with directors.

Mr. Odland stressed: “Strong corporate governance and high ethical standards are not simply matters of personal and public morality. They are also essential for long-term corporate success and world economic leadership by this nation.”

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