Saturday, August 31, 2013

European Company Law and Corporate Governance Conference Sponsored Paper: "Listed Companies' Engagement With Diversity."

 The European Corporate Governance Institute (ECGI) has been at the center of a long term effort to focus research on a variety of aspects of corporate governance among advanced economies. 

The conference series “European Company Law and Corporate Governance Conferences” was launched at a full-day public conference in The Hague on 18 October 2004 during the Dutch EU Presidency. In subsequent years, conferences have been held in several countries during their respective EU Presidency. Information about these conferences, if still available, can be found on various websites. The ECGI has collated documents into a single repository for the first time for the convenience of scholars, practitioners and policy-makers alike. (See EU Presidency conferences Repository)
The 12th Conference took place at the Convention Centre Dublin, on 16 and 17 May 2013, during the Irish Presidency of the EU. The Conference was organized around the publication of the European Commission's Action Plan on Company Law and Corporate Governance which outlines the initiatives the Commission has signaled it will likely take with the objective of modernizing and enhancing the current European structures of corporate governance and company law. (Communication From the Commission to the European Parliament, the Council, The European Economic and Social Committee and the Committee of the Regions, Action Plan: European company law and corporate governance - a modern legal framework for more engaged shareholders and sustainable companies, Brussels, XXX, COM(2012) 740/2().

The ECGI organised two sessions on the first day on the theme of "short-termism," the impact of financial markets and the UK Kay Review.  It also included the presentation of a specially commissioned conference research paper, Deridre Ahern and Blanaid Clarke, Listed Companies' Engagement with Diversity: A Multi-Jurisdictional Study of Annual Report Disclosures, ECGI Working Paper 221/2013. This post presents information about the conference (with links) and some thoughts about that conference paper. 

The Commission's Action Plan identifies three main lines of action:
• Enhancing transparency – companies need  to provide better information about their corporate governance to their investors and society at large. At the same time companies should be allowed to know who their shareholders are and institutional investors should be more transparent about their voting policies so that a more fruitful dialogue on corporate governance matters can take place.
• Engaging shareholders – shareholders should be encouraged to engage more in corporate governance. They should be offered more possibilities to oversee remuneration policy and related party transactions, and shareholder cooperation to this end should be made easier. In addition, a limited number of obligations will need to be imposed on institutional investors, asset managers and proxy advisors to bring about effective engagement.
 •Supporting companies’ growth and their competitiveness – there is a need to simplify cross-border operations of European businesses, particularly in the case of small and medium-sized companies. (Action Plan: European company law and corporate governance - a modern legal framework for more engaged shareholders and sustainable companies, Brussels, XXX, COM(2012) 740/2 (at pp. 4-5)
The synopsis of the main initiatives of the Action Plan may be found at  pages 17-18 of the Action Plan are are worth reviewing.

 More information about the conference may be found here:

The Conference website
The Irish Presidency website
Results of survey carried out in advance of the event
Video recordings of speaker presentations
Slides used on Day 1 of the Conference
Slides used on Day 2 of the Conference
Listed Companies’ Engagement with Diversity: A Multi-Jurisdictional Study of Annual Report Disclosures by Professor Deirdre Ahern and Professor Blanaid Clarke, School of Law, Trinity College Dublin

 More on the paper:

Deirdre Ahern, Trinity College Dublin, School of Law Blanaid Clarke, Trinity College Dublin, School of Law

submitted by
Blanaid Clarke
Diversity, board of directors, corporate governance, gender balance, quotas, comply or explain, hard law, soft law, non-executive directors, annual reports, stakeholders, corporate social responsibility, Action Plan on European Company Law and Corporate Governance, non-executive directors, pipeline

ABSTRACT: The paper reports the findings of a multi-jurisdictional study on companies’ reporting of diversity practices at board level and below. It involved a review of the 2009, 2010 and 2011 annual reports of listed companies in Australia, Belgium, Norway, Spain and the UK. Some of the questions addressed in this research are: Are companies reporting the existence of corporate diversity policies in their annual reports to shareholders? How do companies define diversity? What reported evidence is there of real promotion of diversity as opposed to tokenism? How do different countries compare in their progress and reporting styles in their annual reports? Is there a difference in reported engagement between jurisdictions with mandatory gender quotas and disclosure requirements and those like Ireland and the UK with “comply or explain” rules?” Our research on board composition indicates that a mandatory quota system is more efficient in increasing female representation at board level but that non-binding quotas and diversity reporting requirements lead to progress albeit at a slower pace. Even where women are appointed to boards, there is a noted delay in appointing them to the committee chair level. Statistics concerning gender in middle and senior management are limited. In terms of defining diversity, our research indicates that gender is the most common criteria referred to in all jurisdictions. Other aspects commonly referred to are age, disability and experience. While the existence of diversity policies is commonly reported, this tends to be rather general and imprecise. The majority of companies in the UK, Norway and Belgium do not explain their rationale for reporting diversity although this situation is improving in the UK with the “business case” being cited. In terms of addressing the pipeline issue, our research indicates that in all countries reviewed disclosure of diversity policies in respect of recruitment and promotion is increasing though the figures are not high. In Australia, the UK and Spain, reporting of mentoring and work-life balance policies is also increasing. Networks such as the UK’s Women on Boards are also important to actual and aspiring board members.

The paper is rich and its insights quite valuable.  There are a number of interesting and challenging aspects to this paper worth considering.  I very briefly note some comments for discusison purposes only. First the report's findings must be read with care within the context of the countries chosen for study--Spain, Norway, Australia, United Kingdom, and Belgium, (pp. 18-30).  While well chosen for their range, the absence of Germany and the Netherlands, which tend to be policy and law leaders, might be taken into consideration. Certainly traditionally within the E.U. it has been the contests between German and U.K. approaches that has tended to set the stage for the great corporate policy debates of the last generation.  Second, the definition of diversity is most interesting.  The focus on gender is understandable but certainly from an American perspective raises a host of red flags, especially where viewpoint diversity might be used as a coiver to create hierarchies of diversity which continue to privilege white and politically privileged perspectives.  Not that this study would be the appropriate venue for such an alsysis but that the report itself might well reveal the political premises underlying approaches to diversity that remain powerful but that may privilege particular communities and force others to compete or be socialized in subtle ways. Thus, for example, it may make little difference to an ethnic minority in a state that a board of directors now consists of equally balanced white males and females from the majority race and ethnic group, whose diversity is increased because they might include a variety of somewhat distinct viewpoints. At some level that may suggest little diversity at all, especially where an enterprise has a global reach and global stakeholders. The differences between Australia and the European states is most telling here.  Lastly, it might be worth elaborating the importance of the role of institutional investors in the formulation and implementation of diversity policy.  It is ironic that having included Norway, whose aggressive policy of using its institutional and market power to affect the governance policies of companies in which its sovereign wealth fund has invested, there is relatively little attention paid to the central role of private power, even private power asserted by public organization, in the formulation and implementation of sound diversity policies well beyond their own borders.  (e.g.,  Backer, Larry Catá, Sovereign Investing and Markets-Based Transnational Legislative Power: The Norwegian Sovereign Wealth Fund in Global Markets (November 18, 2012). Coalition for Peace & Ethics Working Paper No. 11/11. American University International Law Review (forthcoming 2014). 

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