Journal of Common Market Studies Vol. 37, No.

2
June 1999 pp. 269–94

A European Perspective on
Corporate Governance*

KAREL LANNOO
Centre for European Policy Studies, Brussels

Abstract
Corporate governance has become a topical issue in many European countries
in recent years. Despite there being much conventional wisdom about the
different systems of corporate governance, many questions remain on how the
European scene will evolve. This article reviews the divergences in both the
practice and philosophy of corporate governance in Europe, summarizes the
regulatory policy considerations at the national and European levels, and
speculates on the possible evolution of the systems. Because of market
integration and shifts in pension financing and privatizations, a greater role for
the market can be expected in corporate control. The article reveals a contra-
diction between the globalization of markets, of which also the EU’s single
market is an example, and the insular character of the national discussions, as
can be observed in the results and recommendations of corporate governance
committees in France, the Netherlands and the UK. The latter is reflected in the
debate on company law harmonization measures at EU level, which have been
held up for a long time on the grounds of ‘subsidiarity’. As a way out of this
deadlock, the article proposes that industry, or the European Commission,
should come forward with a recommendation for a European-wide self-
regulatory code of best practice in corporate governance, to underline the
European dimension of the debate.
* I have benefited greatly from discussions at a CEPS Working Party in 1995, in which I acted as rapporteur.
CEPS is an independent policy research centre.
© Blackwell Publishers Ltd 1999, 108 Cowley Road, Oxford OX4 1JF, UK and 350 Main Street, Malden, MA 02148, USA
270 KAREL LANNOO

I. Introduction
Corporate governance has become a topical issue in many European countries.
The debate on the role and control of corporations has moved to the top of many
national agendas as a result of the spread of US-style shareholder activism,
privatizations and the opening-up of markets in the single market programme, as
well as the growing incidence of bad corporate management and outright fraud.
Several EU countries have launched formal and informal groups to discuss the
future of their corporate governance systems. Following the example of the UK,
working parties in France and the Netherlands have issued firm proposals, and
recommendations are in the process of being finalized in Belgium, Italy and
Spain.
Increasing globalization, and the disappearance of national boundaries give
impetus to the debate, yet the European dimension is rarely evoked or, is often
totally absent. This lacuna should come as no surprise to European legislators,
who have, over the past 25 years, fought hard to bring some harmonization to
standards for corporate control in the EU. They have been faced with irresolvable
disagreements among Member States, or to put it the other way around, each
Member State felt the specificities of its own system were not properly appreci-
ated by the Brussels lawmakers, and would unnecessarily disappear in the
harmonization process. This article argues that either industry or the European
Commission should take the initiative to come up with a European-wide code of
best practice, in the light of the improbability that any significant harmonization
of corporate governance standards will occur at European level. Such a move
would be an easier and faster way to bring about the necessary convergence
between EU Member States’ systems.
More generally, corporate governance is an interesting example of the
dialectic in the European integration process between integration and disintegra-
tion, between the need for more centralization in certain areas (such as monetary
policy), and the insistence by Member States on respect for national traditions
and cultures (the ‘subsidiarity test’). A European-wide framework for good
corporate governance could easily be established and would benefit European
industry and its stock exchanges, but since the distortions resulting from the
current differences are hard to prove, Member States are reluctant to pursue any
further statutory harmonization.
Section II of this article starts with a closer definition and interpretation of the
term corporate governance. A cross-national comparison of some economic and
structural indicators of corporate governance is given in Section III. Section IV
puts the national and European regulatory debates in perspective. The dynamic
elements of the process are explained in Section V, and policy conclusions are
set out in the final section.

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II. What’s in a Name?

Corporate governance refers in essence to the organization of the relationship
between owners and managers of a corporation. The way in which countries
structure this relationship takes different forms across the globe, reflecting
different economic circumstances and national traditions.
At first sight, the term corporate governance is not easy to understand, even
for a native English speaker. It has two components: corporate, which refers to
corporations or big companies; and governance, which is defined as the act, fact,
or manner of governing. The second component might be the principal source of
confusion, owing to its allusion to government, which brings a public element
into a domain that is essentially considered private. The term was defined by the
Cadbury Committee, a group set up in the UK in 1991 to examine standards of
financial reporting and accountability, as ‘the system by which companies are
directed and controlled’. This definition, however, also contains the duality of an
internal (directed) and external (controlled) element.
The term cannot easily be transposed into other languages, while preserving
at the same time the duality of its nature. The French translation gouvernement
d’entreprise does justice to the public element, through the word gouverner, but
an entreprise is not always a corporation. The word Unternehmensverfassung is
often used in German, although it has a narrower legal meaning.
These linguistic problems reveal the fact that the notion of corporate govern-
ance is perceived differently from one country to another, and that it sometimes
refers to distinctly different matters for different persons and institutions,
depending on the circumstances. The priorities in the debate about the manage-
ment and control of corporations vary, and its intensity and nature are also
different depending on the country in which it is taking place. The corporate
governance debate in the UK, for example, which resulted in the adoption of the
Cadbury Report in 1992, was driven by a concern over the adequacy of financial
control and accountability, and discontent with directors’ pay. In Germany, the
main concern is the efficiency of management control. An issue of regular debate
is the influence of universal banks over corporations through the proxy voting
rights and seats on supervisory boards. In France, the concerns are centred on the
perception of an oligarchy of chief executives who direct big corporations like
kings and rotate amongst themselves at the top, without being really accountable
to the board of directors or the assembly of shareholders.
The meaning of the term corporate governance is further blurred through its
imprecise use in different contexts. Several academic disciplines study corporate
governance, but each brings a different understanding to the term. The literature
of management and business administration, for example, sees it as the most

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efficient way in which a firm can be run, often focusing on the internal
organization of a company. The study of law examines the powers and duties of
the different actors within a given system. And economic theory analyses how
to bridge the conflict of interest between shareholders or owners of a firm and its
managers (the agency problem). Add to this the often interchangeable use of the
words ‘shareholder’ and ‘stakeholder’ and the confusion is complete.
Corporate governance in this article is defined as the organization of the
relationship between the owners and the managers in the control of a corporation.
This implies that the problem emerges where both groups are not the same, which
is mainly the case in larger corporations. A good corporate governance system
will be able to tackle the conflicts of interest between managers and owners of
a corporation, and resolve them. Other stakeholders, such as the workforce,
government agencies, banks, suppliers and customers, or the public at large, have
an interest in corporate control, but the way in which this is worked out differs
widely across countries. Ultimately, it is the shareholder–manager relationship
which is the most essential in corporate governance and which best lends itself
to international comparison. It should be noted, however, that in systems where
there is lesser shareholder participation, other ‘stakeholders’ have been given
greater say in management. In several European countries, employees have seats
on the management board, effectively the supervisory board.

III. A Cross-Country Comparison: The Static Picture

Attempts have been made to classify the panoply of corporate governance
systems found in industrialized countries. Commonly used is the distinction
between the outsider and insider systems, proposed by Franks and Mayer (1992).
The former, currently dominant in the UK and the US, is characteristic of
economies with a large number of quoted companies, a liquid capital market
where ownership and control rights are frequently traded, and little concentra-
tion of shareholdings. The so-called insider system, attributed to continental
Europe and Japan, is characterized by a small number of listed companies, an
illiquid capital market where ownership and control are infrequently traded, and
a high concentration of shareholding in the hands of corporations, institutions,
families or government. The outsider system relies on the market and outside
investors for corporate control; the insider model uses a system of interlocking
networks and committees.
The problem with this distinction is that there are no ‘systems’ that are
different to such an extent as to explain the various factual phenomena. The
differences are in reality in degree only. The systems classified as insider, for
example, are too divergent to be considered in one category. Each of the

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 A EUROPEAN PERSPECTIVE ON CORPORATE GOVERNANCE 273

continental European systems has to a different extent some elements of the

outsider system. From a legal point of view, some are very close to the English
system, but are at the same time very different in the development of financial
markets. On the other hand, the Netherlands, Sweden and Switzerland, three
countries considered to have very ‘closed’ systems, have a relatively large
number of domestic listed companies and a high stock market capitalization (see
Table 1). Comparing Germany and Japan as examples of the insider system is
also rather problematic. Both might have some similar mechanisms of corporate
control, but their dissimilarities are even greater.
A distinction along the lines of outsider/insider strengthens the popular view
of different systems. The conventional wisdom about the German corporate
governance system is commonplace, but does not always seem to correspond
with reality, as was illustrated by Edwards and Fischer (1994). According to their
findings, there is no evidence to support the assertion of the house–bank
relationship, in which a single bank provides all the loans to a firm, or the
relationship between a bank’s voting power and its supervisory board represen-
tation.
The following sections illustrate how difficult it is to generalize about
systems. We analyse two aspects which illustrate the importance of the market
in the exercise of corporate control: the total capitalization of domestic stock in
EU Member States, and the occurrence of take-overs. A crucial element in
explaining the importance of the market, the structure of shareholding, will be
analysed in a third step. Differences in shareholder control rights are discussed
in a fourth.

The Importance of Stock Markets

Issuing equity capital on the market is one of the ways in which a firm can finance
investments. Overall, despite increasing globalization and the integration of
European markets, the relative size of stock markets in EU Member States still
differs widely. At the end of 1997, market capitalization of domestic stock,
expressed as a percentage of GDP, ranged from 194 per cent in the UK and 133
per cent in the Netherlands to 39 per cent in Germany and 31 per cent in Italy (see
Table 1).1 The number of domestic listed companies ranged from 2465 in the UK
to 700 in Germany, 683 in France and 235 in Italy. Overall, the average stock
market capitalization in the EU falls far below the levels registered in the US. By
the end of 1997, the 15 Member States of the EU had a domestic stock market
capitalization of 70 per cent of GDP, compared to 160 per cent in the US (adding
1
The reliability of data on stock market capitalization may be impaired by circular holdings – the cross-
shareholding of listed companies. The Federation of European Stock Exchanges (1993) estimated that the
degree of direct circular holdings between the 5 per cent largest companies on a stock exchange was less than

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the capitalization data of the two most important exchanges, NYSE and NAS-
DAQ). Excluding the UK, the average stock market capitalization in the EU
amounted to 52 per cent of GDP. The number of domestic listed companies in
the EU compares to the figure for the US, NYSE and NASDAQ taken jointly.
The difference within the EU, however, between the UK on the one hand and the
other Member States on the other, is considerable.
Table 1: Comparative Data on European Stock Markets (End of 1997)

Country Total Capitalization Domestic Listed

of Domestic Listed Companies Companies
ECU m % GDP

B 124428 57.8 136

DK 85193 59.1 237
D 750557 39.2 700
GR 31447 30.4 220
E 264508 54.8 384
F 613429 48.8 683
IRL 47695 77.8 77
I 314052 31.3 235
L 30785 221.5 56
NL 426512 132.9 201
AUS 33488 18.2 101
P 35431 39.8 148
FIN 67109 64.5 124
SWE 241978 113.9 237
UK 1879043 193.7 2465

EU15 4945655 69.9 6004

CH 521236 215.8 216
N 60386 47.0 196
JAPAN 1957490 53.7 1805
US-NYSE 8044945 133.6 2271
US-NASDAQ 1574184 26.1 5033

Sources: FIBV, Federation of European Stock Exchanges and European Commission.

Note: Listed companies include main and parallel markets; listed companies and market capitalization do not
include investment trusts, listed unit trusts and UCITS; the data refer to the main market of the states
mentioned, except for Germany, where it covers the federation of German exchanges.

10 per cent. The smallest circular holding ratios were found in Dublin, London and Athens, where they
seemed to be almost non-existent. Paris, Brussels and Stockholm had the largest degrees, with 15 per cent,
22 per cent and 26 per cent respectively. This is however diminishing as a result of rationalizations and
industry restructuring.
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 A EUROPEAN PERSPECTIVE ON CORPORATE GOVERNANCE 275

1993
180 1995
160 1996
140 1997
120
100
80
60
40
20
0

US(2)
B

JAPAN
SWE

UK
D

CH
F

NL

EU15
Figure 1: Stock Market Capitalization as % of GDP (Domestic Listed Companies, End
of Year)

Some countries are notable exceptions to the low levels of stock market
capitalization observed in continental Europe. In the Netherlands, Sweden and
Switzerland, for example, the levels stand much higher than in other continental
European countries and reach Anglo-American standards. Moreover, a marked
increase in market capitalization as a percentage of GDP can be observed in these
countries between 1993 and 1997, going from 62 per cent to 133 per cent in the
Netherlands, 57 per cent to 114 per cent in Sweden and from 118 per cent to 216
per cent in Switzerland (see Figure 1).

The Market for Corporate Control

These data suggest that, in addition to the differences in stock market capitaliza-
tion, the incidence of ownership changes in companies will also differ across
countries. If there is an open stock market where many companies are quoted and
shares are traded, the level of take-overs will also be high. In open markets, the
threat of take-overs ensures that shareholders’ and managers’ interests converge.
If shares perform badly, shareholders will sell, thereby increasing the risk of a
take-over, in which the old management would most likely be replaced. In more
closed markets, take-over activity should be lower and ownership change more
limited, or they may happen in a different way.
Only to a certain extent can this analogy be observed on the basis of data on
the nationality of firms in mergers and acquisitions in the EU for the period 1990–
95 (Table 2). Classification by nationality of the purchasing firm shows British
and French firms being the most active in the take-over market in this period.
British companies dominated with an average share of 26.5 per cent in total
cross-border mergers and acquisitions in the European Union. French firms
followed with a share of 18.5 per cent, and German and Dutch companies ranked
third and fourth with 14.4 per cent and 9.1 per cent, respectively.
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Table 2: Average Share of Cross-Border Mergers and Take-overs by Member State,

1990–95 (No. of Occurrences as % of EU Total)
A B DK D GR E F IRL I L NL P FIN SW UK

Target 1.3 5.0 3.9 25.5 0.4 8.1 13.8 0.9 6.9 0.6 7.5 1.2 3.1 4.5 17.5

Purchaser 1.7 2.9 4.8 14.4 0.1 1.5 18.5 2.9 4.3 1.0 9.1 0.1 4.0 8.2 26.5

Balance –0.4 –2.1 0.9 –11.1 –0.3 –6.6 4.7 2.0 –2.6 0.4 1.6 –1.1 0.9 3.7 9.0

Source: Commission (1996).

Note: M&A data only include completed operations that result in a change of control of an enterprise; for new
Member States, the whole period mentioned was taken into consideration.

A breakdown according to the nationality of the targeted corporation in take-

overs shows Germany playing the largest role. In fact, German companies were
much more often the object of foreign take-overs than they were the initiator.
This phenomenon was due amongst other reasons to the privatization process in
east Germany, but also represented a trend that had already been observed before
1990 (Franks and Mayer, 1990). A negative balance was also recorded in six
other Member States, including the four Mediterranean countries. The best
balance is achieved in the UK, followed by France and Sweden.
These data could also be related to openness for markets in take-overs, i.e. the
mechanisms that management can employ to prevent hostile take-overs. It is no
coincidence that those countries that have multiple voting rights – the Scandina-
vian countries, France and the Netherlands, as discussed below – are more often
the bidder than the target of take-overs.

The Structure of Shareholding

The prime element in explaining the variations in the importance of stock
markets is the financing structure of corporations. As can be observed on the
basis of differences in the own funds ratios, the use of equity capital varies
significantly in the EU (see, e.g., Commission, 1997). A closer examination
reveals, however, that the structure of shareholding in European countries must
also be taken into account. Shareholdings can be locked in other corporations,
which do not need to go to the market to exercise control, or they can be widely
dispersed in the hands of institutional investors and frequently traded on the
market. Table 3 shows that the largest share owners of quoted companies in the
UK are the institutional investors (pension funds, insurance companies, banks
and unit trusts), which possessed 59 per cent of all listed companies in 1993.
Households are the second largest group in the UK with 19 per cent, and industry
(including investment trusts) owns 4 per cent. In Germany, on the other hand, the
situation is rather the reverse: industry is the largest owner of quoted companies
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Table 3: The Structure of Shareholding in Selected Countries (% of Total)

D F I UK US JPN
(As at End of Year) 1990 1992 1993 1993 1992 1992

Financial institutions 22 23 11.3 59.3 31.2 48.0

of which:
Banks 10 9.9 0.6 0.3 26.7
Pension funds/insurers 12 0.8 51.5 23.9 17.2
Others (unit trusts) 0.6 7.2 7.0 4.1
Households 17 34 33.9 19.3 48.1 22.6
Private companies 42 21 23.0 4.0 14.1 24.8
Public authorities 5 2 27.0 1.3 0.7
Foreign investors 14 20 4.8 16.3 6.6 3.9

Source: Lannoo (1995).

Note: The comparability of data is affected by differences in definitions used by the providers of the data and
differences in regulatory structures when comparing data. For example, a bank is a universal bank in
Germany and a high street bank in the UK.

with 42 per cent, institutional investors possess a much smaller part with only 22
per cent (of which banks hold 10 per cent) and households possess 17 per cent.
Households – in this case, families – are the most important owners of quoted
stock in France and Italy, and in the US. In Italy, the government was the second
most important shareholder of quoted companies in 1993 with 27 per cent. No
reliable data exist for the other EU Member States not shown in the table. Only
Sweden has a system in which ownership data are constantly followed by the
stock exchange authorities.
Seen in comparison with the structure of shareholding in the US and Japan,
the dominating role of institutional investors in the UK is fairly exceptional.
Foreign investors, on the other hand, are of minor importance in the US and
Japan.
Over time, a strong growth can be noticed in shareholding by institutional and
foreign investors in several European countries. In Germany, the share of
institutions rose from 9 per cent in 1960 to 22 per cent in 1990; foreign investors’
share increased in the same period from 6 per cent to 14 per cent. In the UK, the
institutional share rose from 19 per cent in 1963 to 59 per cent in 1993, while
foreign investors increased their share from 7 per cent to 16 per cent in the same
period. In France, only the share of foreign investors rose between 1977 and 1993
from 12 per cent to 20 per cent; institutional investors’ shareholding remained
stable. In Sweden, foreign investors’ share went up from 8 per cent in 1983 to 30
per cent in 1995 (Lannoo, 1995, pp. 14–15).
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The structure of shareholding has to be seen in conjunction with differences

in the concentration of ownership in the EU. Single majority stakes account for
about 60 per cent of total stock market capitalization in Italy, compared to about
5 per cent in the UK, the US and Japan. The largest five shareholders own on
average 87 per cent of outstanding shares of the large listed companies in Italy,
compared to 41 per cent in Germany, 33 per cent in Japan, 25 per cent in the US
and 21 per cent in the UK ( OECD, 1995, pp. 60–1). These data however are only
anecdotal, since the disclosure of information concerning ownership and control
is very rudimentary in the EU. Recent research in this subject has uncovered
many barriers to full disclosure, which limit the effective functioning of EU
capital markets (Becht, 1997).

Shareholders’ Control Rights

The structure and concentration of shareholding are two elements that may limit
the role of the market in the exercise of corporate control. Another is the set of
procedures in place which reduce the control of shareholders in public limited
companies, such as multiple or capped voting arrangements or board structures
that function independently from shareholder approval. Through the existence
of multiple or capped voting rights, control can be retained in the hands of those
who possess the majority of voting rights, but not a majority of the capital.
Double or multiple voting rights are a common practice in the Scandinavian
countries, France and the Netherlands. In France, double voting rights can be
authorized as part of clauses in the articles of incorporation or in the by-laws,
under certain conditions. They automatically cease to exist in the event of a share
transfer, which serves as a form of protection against unfriendly take-overs.
French management is reported to support strongly the keeping of this option
(Commission, 1995, p. 51). Multiple voting rights in Finland can be granted for
a maximum of 20 votes per share; in Sweden, they may not exceed ten times the
right of ordinary shares. The circulation of double or multiple voting shares has
an impact on trading and the liquidity of the stock market, since they are
generally not traded. They also could depress prices for ordinary shares if
investors view them as having an inferior voting value.
Non-voting shares exist in most EU countries, where such securities may get
a higher dividend in return for lesser ownership rights, but they are generally
limited by law to a small proportion of total equity capital (they are not allowed
in Denmark, Ireland, Finland or Sweden). Capped voting arrangements or a
maximum number of voting rights per shareholder are allowed in about half of
EU countries. It appears from Table 4 that all countries with multiple voting
rights also limit the total voting rights per shareholder.

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Table 4: Dominant Form of Shares and Voting Rights

Shares Dominant Multiple Non-Voting Capped Voting

Form Voting Shares
Rights

B Bearer No Yes Dep. on by-laws

(< 20 per cent)
DK Registered Yes (< 10x) No Yes
D Bearer No Yes Dep. on by-laws
GR Registered No Yes No
E Bearer No Yes Yes
F Bearer Yes (< 2x) Yes Yes
IRL Registered No No No
I Registered No Yes (< 50 per cent) Yes
L Bearer No Yes No
NL Bearer Yes Yes Yes, see by-laws
A Bearer No Yes Yes
P Bearer No Yes No
FIN Registered Yes (< 20x) No Yes
SW Registered Yes (< 10x) No Uncommon
UK Registered Uncommon Uncommon Uncommon
CH Registered Yes Yes Yes, see by-laws
US Registered Uncommon Uncommon No

Source: Davis and Lannoo (1998).

Note: Voting rights are not only a matter of company law, they can also be set in the by-laws of companies.
It is thus very difficult to generalize about the situation for any given country.

A board structure that functions independently from shareholder approval is

more exceptional, and can in fact be found only in one Member State, the
Netherlands. In the structuurvennootschappen, which many Dutch multination-
als have adopted, the supervisory board, which appoints the management board,
co-opts itself, without any form of shareholder approval.2 Other stakeholders,
however, have a say in these companies, since workers are represented on the
supervisory boards of large Dutch corporations. Workers’ representation is also
commonplace in large German enterprises (Mitbestimmung).

2
In the Netherlands, a company can become a structuurvennootschap when it fulfils two of the following
criteria: obtains minimum capital of 25 million guilders, hires at least 100 employees or establishes a
workers’ council.
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IV. The Regulatory Policy Considerations

The foregoing discussion suggests that there is a great variety in the European
markets and that further steps might be needed to stimulate market integration.
The question emerges of whether policies are actively needed at EU level to
promote greater convergence in corporate governance systems and, if so, which
ones would be the most effective. The debate so far has mainly been held at the
national level, responding to specific national circumstances and priorities; the
European dimension has hardly been raised. The discussion at EU level has been
stagnant for several years. Nevertheless, some trends in the current national
debates might point to solutions for the European deadlock. We will first review
the European approach, and then discuss the results of three national working
parties.

The Debate at EU Level

The EU approach to corporate governance stems from the drive to create a single
market. In the logic of a barrier-free market, companies should be able to move
freely across borders with a single incorporation. This is still a distant prospect,
however. Overall, progress on company law harmonization has been limited,
compared to the rate of adoption of single market measures and achievements in
other areas. Key harmonization proposals concerning the legal structure of
corporations (5th company law directive), cross-border mergers (10th company
law directive), take-over bid procedures (13th company law directive) and the
regulation on a European company statute (Societas Europea, SE) have been
blocked before the EU Council of Ministers for many years.
The European company statute is without doubt the highest on the list of
measures to be adopted, but calls by several European Council meetings and
industry federations to speed up the decision process have not yet had much
effect. The Single Market Action Plan, approved by the Amsterdam European
Council (June 1997) re-emphasized the need for adoption of the SE before the
start of EMU, as part of the measures to achieve a properly functioning single
market before the introduction of the euro on 1 January 1999.3 A recent ad hoc
committee, known as the Davignon Group, set up to make proposals to end the
deadlock on employee participation in the SE, suggested that priority should be
given to freeing negotiations between the parties directly concerned as to the
system of worker involvement in a company. In the absence of an agreement
between the employers and employees, however, a compulsory system should
3
The Single Market Action Plan centres on four strategic targets, namely making single market rules more
effective, dealing with key market distortions, removing sectoral obstacles to market integration and
delivering a single market to the benefit of all citizens. To achieve each of these targets, a series of specific
actions is listed, including both legislative and non-legislative initiatives. Interestingly, the Action Plan did
not mention the draft 5th and 10th company law directives.
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apply in which workers should have the right to be full members of the board or
the supervisory board (in a two-tier board system). The Davignon Group
proposed that one-fifth of the seats of these bodies, or a minimum of two seats,
should be reserved for members designated by the workforce.
It is doubtful that this proposal will ease adoption of the Societas Europea.
Only three Member States, Denmark, Germany and the Netherlands, entitle
worker representatives to have seats on the boards of corporations. Germany has
opposed a lighter structure at European level, for fear that its own national system
would thereby be undermined. But it is an illusion to think that employee
participation is the only problem in reaching agreement on a European company
statute. Other sensitive issues are the powers and responsibilities of shareholders
and boards, the existence of barriers to take-overs, the discretionary powers of
government, taxation, or more generally, whether further statutory harmoniza-
tion is desirable in an area where, already at national level, change is very
difficult to implement. It will therefore be important to examine carefully how
these issues have been settled if an agreement is reached on the SE, to assess its
efficacy and operability. It is likely that far-reaching compromises on the
regulation will undermine its usefulness.
Harmonizing company law legislation deeply affects areas that are consid-
ered to be an essential part of national economic and social traditions. Setting
rules on company structures and employee participation has a much greater
impact on national systems than does legislation that harmonizes rules for food
labelling or additives. On the other hand, distortions caused by non-harmoniza-
tion of corporate governance rules are much less evident. Differences in
accounting systems and company structures do not distort free movement of
goods or services directly, although it may impact on the free movement of
capital. The debate over whether the EU should enact harmonizing legislation in
this area, in light of the subsidiarity principle, and which instruments should most
appropriately be used, is highly relevant.
The foregoing should not give the impression that nothing has been done in
the area of company law. The EU has enacted harmonizing legislation regarding
the establishment of companies, the reporting requirements and the audit of
accounts. These are, however, of lesser importance compared to the drafts that
are still under discussion, and their harmonizing effects are limited due to the
inclusion of many options, as is the case with the accounting directives (4th and
7th company law directives).
Nevertheless, the achievement of a single market in other sectors will not only
highlight these shortcomings, but it will also have a strong impact on the
convergence of corporate governance standards, most importantly through
financial-market integration. The EU measures in the areas of banking, insur-
ance and investment services have radically increased competition in the
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provision of financial services in the EU. Financial institutions can provide

services and open branches across borders with a single licence. This process will
be strengthened further in the years to come with the realization of economic and
monetary union (EMU). EMU can be expected to change asset allocation
patterns of European institutional investors, diminishing the home bias in
investments and increasing the share of equity investments (Lannoo and Gros,
1998). Investors will be in open competition in asset mix and portfolio returns,
leading to a more active posture with respect to their equity investments.
The EU has also enacted legislation to ensure some general capital market
transparency principles, such as the directives prohibiting insider dealing (1989)
and requiring publication of the acquisition or disposal of major holdings by
corporations (1988). But the attention given to implementation and enforcement
of both directives by the Member States leaves much to be desired.

The National Debates

In several European Countries, changes in corporate finance and in the structure
of shareholding have resulted in debates on the appropriateness of the corporate
governance system.
A closed system, which uses all forms of poison pills against hostile take-
overs, could in the long run fall into disfavour with international investors. Also
the efficiency of internal control procedures and the functioning of boards have
been called into question as a result of fraud and management failures. The
following section compares the results of local corporate governance commit-
tees established in the UK (Cadbury and Hampel), France (Viénot) and the
Netherlands (Peters) to examine similarities and lacunæ. Committees have also
been set up in Belgium, Spain and Italy, but it is too early to include their work
in this survey.
The Cadbury and Hampel Reports. Concerned about standards of financial
reporting and accountability of boards, the London Stock Exchange set up the
Cadbury Committee in 1991, with the aim of taking a position on the role of
executive and non-executive directors in corporations. The recommendations of
the Committee were summarized in a ‘Code of Best Practice on the Financial
Aspects of Corporate Governance’ (emphasis added). Although it is voluntary,
reference to the Code is part of the listing requirements for the London Stock
Exchange. UK-listed companies are requested to indicate their degree of
compliance with the Code in their annual report and explain the reasons for any
non-compliance. This practice corresponds with a tradition of self-regulation

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 A EUROPEAN PERSPECTIVE ON CORPORATE GOVERNANCE 283

that is well developed in the City, and was also until recently applied in the
financial sector.4
The main recommendations of the group concern the structure of the board
and reporting procedures. Although these principles have become widely known
and commonly accepted, they were new at the time. The Cadbury Committee
expressed a strong preference for a division of the role of the chief executive and
chairman of a corporation. It stressed the importance of the independent element
on the board: an important part of the non-executive directors should be truly
independent of management and of high calibre; they should be able to obtain
independent advice; their pay should reflect time spent on the board and they
should be appointed via a formal process. Executive directors’ pay should be
disclosed and subject to review by a remuneration committee. The Cadbury
Committee required the board to appoint an audit committee, which is obliged
to follow detailed procedures. Directors should report on the effectiveness of the
internal control procedures and state that the business is a going concern.
Institutional investors were asked to exercise their voting rights.
The debate in the UK did not end with the Cadbury Report. On the contrary,
discontent with the level of executive pay, above all in privatized companies, led
to recommendations on the subject by the Greenbury Committee (1995). The
Hampel Committee (January 1998) was in charge of updating and consolidating
the previous two reports. It reaffirmed the Cadbury recommendations and
incorporated Greenbury. Important additions concern the role and procedure of
the Annual General Meeting (AGM), the responsibility of institutional investors
in making sure that the code is respected by firms, and the independence of
auditors. The Hampel recommendations are being ‘codified’ to update the
Cadbury Code in the listing requirements for the London Stock Exchange.
It is not clear whether self-regulation will remain a feature of the financial
services sector in the UK. The ruling Labour Party often indicated during its
election campaign that it would legislate in the area of corporate governance. In
the first major post-election statement on the issue, Trade and Industry Minister
Margaret Beckett was quoted in the press on 4 March 1998 as saying that
institutional investors should vote all their shares and make ‘1998 the first year
in which there is a step change’ in ballot participation (see Governance, March
1998; Global Proxy Watch, 5 March 1998). If this did not occur, there would be
a voting requirement in the review of UK company law. Institutions should
annually issue and disclose voting policies and records so that they may be held
accountable. Issues to be examined include executive pay and directors’ duties.
UK institutional investors, which control 60 per cent of local quoted companies,
4
The new Labour government announced in May 1997 a far-reaching change of the institutional structure
of financial supervision in the UK, by which all financial authorities would be merged into one single fully
statutory body, the Financial Services Authority (FSA).
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exercise on average less than 40 per cent of their votes at AGMs, and no
significant increases have been notified so far.
The Viénot Report. The French Viénot Committee was instituted by the French
employers’ federation CNPF. It was driven by an awareness of the growing role
of the market in corporate control as a result of privatizations and globalization,
and the need to respond to preserve the competitiveness of the French Bourse.5
Behind it was also the general perception that French boards, or CEOs, did not
care about shareholders and corporate control procedures. The practice of cross-
shareholdings limited shareholders’ influence, and multiple board mandates
reduced the effectiveness of control.
The report proposed no fundamental changes to the character of the French
system; on the contrary, it tried to justify them. It insisted on the social role of the
enterprise, the collective responsibility of the board versus all shareholders and
the primacy of the company’s interests.6 The group did not believe that legal
changes were necessary. On the contrary, the report often referred with satisfac-
tion to the flexibility of the French legal system.7 A series of recommendations
to enterprises and a ‘Directors’ Charter’, which suggested a set of business ethics
for directors, were thought to be sufficient.
The Committee concluded that all listed companies should at least have two
independent directors on the board. The number of directorships (as a result of
cross-shareholdings) should be limited, but no remedy was seen in the prohibi-
tion of combining the role of CEO and chairman. Viénot thereby missed the
opportunity to change one of the most controversial elements of the French
corporate governance system, namely the strong concentration of powers in the
hands of the Président-directeur-général (PDG, or CEO and Chairman). As in
Cadbury, the report supported the creation of special committees for remuner-
ation, audit and selection of directors which, however, should not lead to an
augmentation of cross-committee memberships. The audit committee should
verify that internal control procedures are being followed.
Given France’s corporate culture, it could be expected that the Viénot Report
would be less far-reaching than its British counterpart. Nevertheless, it contains
some serious oversights: there is no code per se, but rather a scattering of
recommendations that appear throughout the report; the ‘Director’s Charter’
only emphasizes business ethics; and the report does not discuss enforcement.
The French securities commission (COB) is said to perform the latter function,

5
The Viénot Report, Le Conseil d’Administration des Sociétés Cotées, is more limited in its focus than the
others and deals only with the role of the board.
6
‘In Anglo-Saxon countries, the emphasis in this area is on enhancing share value, whereas in continental
Europe, and particularly in France, it tends to be in the company’s interest’, Viénot Report, p. 5.
7
Although not mentioned in the report, the Viénot Group might amongst other things have thought about the
French double voting rights system, discussed above.
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 A EUROPEAN PERSPECTIVE ON CORPORATE GOVERNANCE 285

but it is hard to imagine how this can be done in the absence of a clear code and
a link with rules for listing on the stock exchange, as suggested by Cadbury.
Three years after publication of the Viénot Report, this problem has not yet been
clarified.
Dissatisfied with the results of the Viénot group, French Senator P. Marini
proposed a far-reaching modernization of French company law in a report
published in September 1996 (Marini, 1996). Marini’s concerns are comparable
to the Viénot Group, but he called for a more competitive legal framework to
allow for greater contractual freedom. Marini suggested more organizational
freedom for the board, a simplification of the kinds of shares issued, an
improvement of internal control procedures, and gave a preference to the
division of the role of CEO and chairman. Marini also believed that institutional
investors should exercise their voting rights. The latter was made a legal
requirement in the draft pension fund legislation (February 1997) of the Juppé
government, but this law was not enacted as a result of the change of government
and is now back on the drawing board.
The Peters Report. The raison d’être of the Peters Committee is similar to the
French group: to examine whether changes in the Dutch corporate governance
system were necessary in response to increasing globalization and the growing
role of institutional investors. It was also concerned with the reputation of the
Dutch market of being impenetrable to foreign (hostile) take-overs.
The initiative was taken by the Dutch stock exchange and the quoted
companies. As with the two other groups, the Peters Report did not recommend
changes in statutory legislation, but in the Dutch case this is especially regretta-
ble. The system of co-option (which many regard as being highly archaic) of the
supervisory board is kept in place, without sufficient justification. The board of
directors, or the supervisory board in case of the two-tier board structure, is
appointed and approved by the assembly of shareholders at the annual meeting
(AGM) in all EU countries except the Netherlands, as is the practice with the
structuurvennootschappen. The Committee argued that this situation could
continue, if the boards can work with the confidence of the AGM. Regarding the
capped voting system, which is widely applied in the Netherlands, the Commit-
tee believes that this should be allowed under the current circumstances, where
participation at the AGM is low, since those present would otherwise have a
disproportionate say. If this were to change, which the Committee believes to be
desirable, this situation should be reconsidered.
Within the framework of the two-tier board structure, which is common in the
Netherlands, the supervisory board should act as the non-executive directors in
the one-tier system. Peters recommends that it should be sufficiently independ-
ent of the management board, and comprise at most one former executive

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Table 5: A Brief Comparison of the Cadbury, Viénot and Peters Reports
Publication Cadbury (UK)
Date December 1992
Initiator(s) London Stock Exchange
(LSE), industry
Board CEO≠Chairman,
structure Exceptions must be
justified
Majority of non-executive
directors must be truly
independent, and a
minimum of three
Executive pay to be
disclosed, approved by a
remuneration committee
Need for a selection
committee (Hampel)
AGM Institutional investors
should exercise their
voting rights, and
make sure that the Code
is respected (the latter is
addition from Hampel)
Voting to be disclosed
by subject (Hampel)
Reporting Need for audit committee
Directors to state that
business is a going
concern, to report on
internal control
procedures
Result Cadbury Code
(updated in Hampel Code)
Disclosure Annual report
Enforcement LSE, part of listing rules
Method Self-regulation
Follow-up Greenbury (1995) on
executive pay; Hampel
(1998) consolidated both
© Blackwell Publishers Ltd 1999
KAREL LANNOO
Viénot (France) Peters (The Netherlands)
July 1995 June 1997
French employers’ Listed corporations,
federation (CNPF) Dutch stock exchange
CEO=Chairman CEO≠Chairman
(PDG)
(but not for Marini) Supervisory board to
be independent from
management board
At least two Directorships should
independent directors be limited
Directorships should
be limited
Create remuneration Remuneration and
and selection selection committees
committees to be considered
‘Directors’ Charter’
Collective Co-option of
responsibility of the supervisory board
board can be kept
(Not discussed) Limitations on voting
rights can, for the time
being, be kept in place
Need for audit committee Need for audit committee
Directors to state that Management board must
internal control inform supervisory
procedures are going on board of internal
control procedures
(Nothing tangible) Peters Code
(Nothing explicit) Annual report
Not discussed: securities To be determined after
commission (COB)? 1998 annual report season
Self-regulation Self-regulation
Proposals by Senator (Too early)
P. Marini
 A EUROPEAN PERSPECTIVE ON CORPORATE GOVERNANCE 287

director. The number of directorships should be limited, and avoided in compa-

nies with which a cross-shareholding exists. The board must consider whether
committees for selection, audit and remuneration should be installed. The
executive board has to report to the supervisory board on the results of internal
control procedures and ensure that systems are in place to protect against fraud
and misinformation.
The report finishes with a code of some 40 recommendations. Listed
companies will have to indicate in their 1998 annual report to what extent they
comply with the code, as well as justify cases of non-compliance. Enforcement
will be discussed after the 1998 reporting season, on the basis of the first
experience with compliance with the code. It will most probably be done by a
body linked to the stock exchange. The report concludes that ‘the aim of this is
to promote an effective system of self-regulation’ (Peters Report, 1997, p. 29).

V. Pressures for Change: The Dynamic Picture

The elements of change have already emerged in the process detailed above, and
the effects of globalization were explicitly part of the mandate of the Viénot and
Peters groups. Four specific developments can be distinguished which are
increasingly having the effect of reducing the idiosyncrasies of systems, opening
national markets to international competition and augmenting the importance of
stock markets: the growing role of institutional investors; the integration of
financial markets; the increased shareholder activism; and the recent wave of
privatizations.

The Growing Role of Institutional Investors

The trend, discussed above, in which institutional investors have increased their
share of listed companies over time in several European countries is likely to
continue, above all in continental Europe, due to developments in retirement
financing and health care. The ageing of the European population will lead to
increased dependency on funded schemes in the financing of retirement provi-
sions. European countries currently rely to a large extent on publicly operated
pay-as-you-go financed pension schemes, in which contributions from the active
working population pay for the pensions of the retired. Growing pensioner-to-
worker ratios and restraints on public spending will make these schemes more
and more untenable, and a larger share of pension contributions will have to be
financed by funded labour market and/or individual pension schemes. Similar
changes might also occur in the health care sector, where parts of the tasks that
are now carried out by the public sector will be divested and handed over to the
private sector.

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These developments will lead to an increase in the demand for equity and dis-
intermediated finance by institutional investors, acting as the depositors of
pension funds. They will push companies to adjust their financing methods and
may well result in a reduction of the debt-to-equity ratios of European industry.
The role of purely commercial banks (as opposed to investment or universal
banks) might diminish in favour of securities markets. Governments might have
to reconsider the preferential tax treatment of debt as compared to equity
financing.
The growing importance of institutional investors in European capital mar-
kets will push corporate governance towards the British/American model.
Information to shareholders, the one-share/one-vote principle, dividend policy,
executive pay and the assembly of shareholders will all become increasingly
important. Institutional investors will be on the demanding side for equal
treatment in take-overs and for restrictions on insider trading and dual classes of
shares or capped voting arrangements. They can be expected to introduce a more
active form of shareholding and pose a direct threat to inattentive or incompetent
management. The growing competition amongst them will only intensify this
process.
American pension funds, which possess, in volume terms, the most assets of
all western countries, are increasingly investing outside the US and bringing
their corporate governance standards with them. The foreign stock of an average
US pension fund portfolio was less than 4 per cent in 1986, but rose to 10 per cent
in 1996 or about 220 bn ECU (for comparison, total assets of EU pension funds
stood at 1416 bn ECU in 1996, of which less than half was invested in equity).
American pension funds are required by law under the Employee Retirement
Income Security Act (ERISA) actively to monitor investments and communicate
with corporate management. The US Department of Labor declared the proxy
vote an asset that must be exercised to comply with ERISA legislation and
required the companies managing the funds to develop voting guidelines aimed
solely at member interests. This requirement applies to foreign stock as well. In
the UK, the Cadbury Report has called upon institutional investors to make
positive use of their voting rights, a recommendation that was strengthened in the
follow-up Hampel Report. The two major British institutional investors’ asso-
ciations – the Association of British Insurers (ABI) and the National Association
of Pension Funds (NAPF) – both stress active corporate governance and
adequate information to shareholders.

The Integration of Capital Markets

The former should be seen in connection with the developments in the EU to
create an integrated capital market. The EU’s third life and non-life insurance

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directives, which came into force in July 1994, reduce investment restrictions
and lift localization requirements for the investments of insurance companies
throughout the EU. The investment services directive, in force since 1996,
allows cross-border share trading in the EU with a single licence. Although a
draft EU directive liberalizing restrictions in pension funds investment had to be
withdrawn, increasing integration of markets and competition will further
liberalize the investment climate for institutional investors. At the moment,
Ireland, the Netherlands and the UK, which represent 75 per cent of all pension
fund assets in the EU, have no limits on the portfolio distribution of pension
funds, the sole exception being the Dutch civil service pension fund, ABP.
Foreign asset holdings are limited in Germany, Belgium and Denmark. German
insurance companies and pension funds may invest 30 per cent of their stock in
shares, but the traditionally risk-averse fund managers have up to now not been
constrained by this limit. They invest abroad on average at a much lower level
of 15 per cent.
The achievement of monetary union (EMU) is a further quantum leap in this
process. Insurance companies, which are subject to an 80 per cent currency
matching rule (at least 80 per cent of assets have to be denominated in the same
currency as the liabilities), will be able to diversify their investments in a much
larger euro zone. This allows institutional investors, certainly in small countries,
to have more balanced portfolios. Increased competition will lead to higher
shares of equity in portfolios. Institutional investors in continental Europe have
traditionally over-invested in bonds, whereas equity holdings were under-
represented. The latter form a much more important part of the portfolio of
British and US firms. They are more volatile but give a better return in the long
run.

Shareholder Activism
Another development that has opened up the control of corporations is the
increased activism of shareholders.8 The trend is clear in the US and the UK,
where shareholders are joining forces to have a stronger position vis-à-vis
management, but it is also emerging in several continental European countries.
Voting services inform shareholders of their rights and encourage them to
exercise their proxy. They notify shareholders of the issues that will come up for
voting at the annual general meeting and give background information on the
different resolutions. They advise shareholders on which issues are contentious
and which are not.
Reference was made earlier to the legal requirement for US pension funds
actively to vote their shares under ERISA. On 29 July 1994, the US Department
8
The term shareholder activism refers here only to the professional, investment-oriented behaviour and not
the other forms of activism based on moral, ethical or ecological considerations.
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of Labor reaffirmed its position in guidelines for responsible ownership by

pension funds, which call for proxy vote decisions to enhance the value of the
shares and active monitoring and communication with corporate management.
The latter includes not only the selection of candidates for the board, but also
consideration of executive compensation, the corporation’s mergers and acqui-
sitions policy, the extent of debt financing and capitalization, long-term business
plans, workforce training and practices, and other financial and non-financial
measures of corporate performance.
The Cadbury Report in the UK also called upon institutional investors to
make positive use of their voting rights and to disclose voting policies, which was
reinforced in the draft Hampel Report. The UK pension funds association NAPF
organizes a voting issues service to allow their members to exercise their proxy
votes. It monitors the largest UK companies, analyses their annual reports and
assesses each company’s position in relation to the corporate governance criteria
of the Cadbury Code. The organization reports on resolutions requiring share-
holder approval at general meetings and dispatches reports about issues on the
ballot in time for proxies to be lodged. NAPF feels that these measures can assist
fund managers to improve the value of investments. This trend is gradually
spreading in continental Europe, not only through the shareholdings of Ameri-
can and British investors, but also through increasing awareness of shareholder
rights and the potential benefits of activism.
A recent survey on shareholder voting patterns of European institutional
investors found that voting in the EU stops at national borders (Davis and
Lannoo, 1998). Despite owning a high percentage of stock outside home
markets, European shareholders stop casting ballots at national frontiers. High
costs, insufficient information, cumbersome procedures or unequal voting rights
were cited as reasons. There is thus clearly no single market as far as share voting
is concerned. US investors do not seem hindered by these problems, however,
and vote increasingly abroad – also in Europe. Since it is increasingly being
recognized that good corporate governance increases performance (OECD,
1996), this anomaly should lead policy-makers and business to act.

Privatizations
Several continental European countries have launched important privatization
rounds of state assets. Banks, utilities and other state holdings have been up for
sale to the public in Belgium, France, Germany, Italy, the Netherlands and Spain.
These moves have increased the importance of stock markets and augmented
their capitalization. The prime example is Italy, where stock market capitaliza-
tion as a percentage of GDP is among the lowest in the EU (see Table 1) and
where the share of government ownership of listed companies amounted to 27

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per cent in 1993. Having an overall view of the importance of government

ownership is difficult, however, since publicly owned corporations are generally
not quoted on the stock exchange.
Nevertheless, the Member States’ desire to keep privatized corporations
nationally ‘anchored’, in order to retain shareholding in the hands of nationals
and to control national assets, might also play a role in preventing corporate
governance from becoming harmonized and transparent. In several European
Member States, privatizations were placed with local companies and investors.
In France, a core shareholding of the privatized companies was in general placed
with French institutional investors and corporations (les noyaux durs). Local
individual residents came in second place, but not much was left for foreign
investors. The same strategy was followed in other European countries, such as
Spain and Belgium. Clearly, however, such policies are irreconcilable with
membership of an integrated European market.

VI. Conclusions
Despite the existence of a single market for goods, services and capital, Europe
still projects a very diverse picture in the functioning of corporate governance
mechanisms. These differences can largely be explained by variations in
shareholding structures and different social and economic traditions. With the
single market measures gradually achieving their effect and the market playing
a bigger role in corporate control, a gradual convergence in corporate govern-
ance standards can be expected.
This convergence can already be observed on the basis of a comparison of the
recommendations of the three semi-official committees, Cadbury, Viénot and
Peters, which discussed the improvement of national corporate governance
systems and their adaptation to increasing globalization. The parallels in the
recommendations from the three groups are striking. They include the need for
truly independent and well-qualified directors, the separation of chairman and
CEO functions (except in the Viénot Report, but subsequently pursued by
Senator Marini), the limitation of the number of board mandates, the prohibition
of mandates in cross-held companies, etc. There is also a clear agreement
between the three groups on the means to be used: self-regulation is clearly the
instrument of choice, rather than changes in statutory legislation.
The European dimension of the debate is absent, however, in each case.
Although an integrated European market exists and constitutes one of the sources
of pressure on national corporate governance systems to adapt, the debate on
reforming and improving the corporate control system stops at the national
border. Secondly, the question arises as to whether the local corporate govern-

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ance committees, at least in continental Europe, really want change. This

explains the stalemate at the European policy level: corporate governance
legislation is seen as a prerogative of the Member States. Differences in
standards do not distort free movements of goods or services, and the subsidiarity
clause comes into play. In short, it is difficult to prove why European-wide
legislation should be enacted. Member States and industry prefer to keep control
over corporate control in their hands.
Nevertheless, as shown in this article, improvements in corporate governance
practices could increase Europe’s competitiveness and enhance the attractive-
ness of its equity markets. Should a basic code of best practice not be set at the
European level? Ideally European industry should take the initiative to develop
a code. A 1995 CEPS Working Party Report on Corporate Governance in Europe
suggested that, as a way out of the regulatory deadlock at European level, a group
of blue chip European corporations should show the way and adopt a European
Code of Good Practice in corporate control. This code should set minimum
standards for the direction and control of corporations in the EU. The effect on
the market and investors would attract attention, and other companies would
soon follow suit in subscribing to the guidelines. Observance of the guidelines
would be monitored by an independent body, such as the stock exchange
authorities or the chartered auditors of the company. As called for in the Cadbury
and Peters Codes, companies would indicate their level of compliance and
explain any deviations in their annual reports.
Discussions in the corporate governance committees in the Member States
have, however, demonstrated that industry still sees the actual differences
between systems as insurmountable and does not yet really think ‘European’.
Should this not lead the European Commission to take action in this domain, and
come forward with a recommendation for a European code of best practice? Even
at the global level, there is agreement on best practice in corporate governance,
as shown by recent initiatives by the OECD in this area. The need for a common
standard within the EU, however, is much greater, because of the existence of a
common legal framework, a single market and a single currency. Such a
European Code should function as a minimum standard, and could easily point
to the lacunæ in local codes. It would thus bring more convergence in the
European corporate governance systems, and could serve as a benchmark for the
central and eastern European countries in the approximation of laws process.
At a minimum, the European Commission could focus on a more modest
policy agenda and simply work to harmonize practices which would better allow
investors to work in Europe as one market. Notices for AGMs, procedures to vote
at AGMs, voting by mail, etc. differ from market to market, and keep national
boundaries in place. These issues will need to be tackled soon, as investors will

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look at the euro-zone as one market, and change from country-oriented invest-
ment policies to sector-oriented. These steps should be seen as narrow, short-
term measures only and not be allowed to dampen the impetus towards a
European initiative in corporate governance.

Correspondence:
Karel Lannoo
Centre for European Policy Studies
Place du Congrès 1
B1000 Brussels, Belgium

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