TI submits response to consultation on corporate governance in Europe

Strong corporate governance is an effective bulwark against corrruption and fraud. As the Newscorp scandal once again demonstrates, lapses in corporate governance can allow corruption, fraud and malpractice to thrive, with dramatic consequences for the public, shareholders and other stakeholders.

In this response to the European Commission's green paper on the corporate governance framework for European companies, TI issues recommendations on the composition of boards of directors, the role of independent directors and the disclosure and monitoring of corporate governance statements. It also raises concerns about corpoate governance in non-listed companies, such as state-owned companies, and in listed family-owned companies.

The response can be downloaded here.

Other written Contributions/EC Consultations

• 24 June 2011 - Transparency International's contribution to the European Commission's public consultation on modernising public procurement policy in Europe is available here. It has been widely documented that procurement, due to its scale and nature, is a field highly susceptible to corruption and bribery. Public procurement accounts for around 16% of the Union’s GDP, and modernisation efforts of procurement policy will threrefore have a significant economic impact Union-wide.
• 28 February 2011 - See here TI's response to the European Commision's Single Market Act consultation. Among the 50 proposals outlined by the Commission, TI has highlighted 4 priority areas: corporate governance, public procurement (including defence procurement), financial reporting and dialogue with civil society. Following this consultation, the Commission will present concrete policy initiatives in early 2011, with the headline goal of having these adopted over the period 2011-2012.
• 15 February 2010 - TI promotes anti-corruption company reporting. The reporting should be integrated, including in the stock exchange filings, and enable all stakeholders to make a more informed assessment of the economic value and sustainability of a company. TI further recommends strengthening co-operation between the EU and existing global reporting voluntary initiatives. Read more.
• 23 April 2009 - TI recommends improving the integrity of the financial markets. Read more.
• 2 April 2009 - Recommendations to UK PM Gordon Brown as host of of Group of Twenty meeting on economic rescue and reform measures. Read more.
• 19 February 2008 - Anti-corruption letter to French EU presidency on financial transparency. Download the original letter, or an English translation.

Press Releases

• 4 October 2011: Financial sector transparency needs urgent overhaul. Read here.
• 8 July 2011: TI welcomes new coalition to bring about financial reform. Read here.

TI's private sector position

TI position on EU financial reform: The financial crisis revealed serious flaws in the integrity of the banking system, exposing major cases of fraud, conflict of interest and insider trading. This integrity deficit is a cause for concern given the role of the financial system as a conduit for the illicit proceeds of corruption. For that reason, TI has been monitoring the progress of the reforms to global finance agreed by G20 leaders in 2009. The TI EU Office has taken a lead in advocating for greater transparency in the legislative package being implemented in Brussels. The campaign has focussed on:

• Improving corporate governance in financial institutions
• Removing systematic conflicts of interest in the audit and credit rating industries
• Monitoring conflicts of interest and revolving doors in the new EU supervisory bodies
• Increasing transparency in the operation of financial markets
• Highlighting the role of the “shadow” banking system in facilitating regulatory arbitrage

TI's contributions to EU financial service reform can be accessed below:

1. Presentation to European Commission Group of Experts on Banking Issues (GEBI - 1 June 2011) on the role of transparency in financial services reform
2. Submission to the Expert Group on Market Infrastructures (EGMI) on the transparency of EU financial market infrastructures (April 2011)
3. Submission to European Commission Consultation on Corporate Governance and Remuneration of financial institutions (December 2010)
4. TI Recommendations to G20 (August 2010) on financial reforms

Regulation and supervision: Secure greater transparency, public accountability and integrity in order to restore public trust, and adopt a far more consistent and internationally coordinated framework of regulation and supervision of all financial institutions.

Rescue measures: Ensure effective safeguards, with transparency and accountability at the forefront, in all aspects of public management of taxpayers’ funds in support of efforts to restore the sound functioning of financial institutions and markets.

Offshore havens and other non-cooperative financial centres: Halt evasion of all taxes and the facilitation of illicit activities through the use of offshore havens and other non-cooperative financial centres, and ensure that these centres cooperate fully with other national and international authorities on the exchange of information.

Governance: Build stronger corporate governance in financial service firms with an emphasis on executive compensation, risk management and disclosure of financial products, including greater accountability of boards of directors. Extend whistleblowing procedures and protection to anonymous information on excessive risk-taking.

Conflicts of Interest: Take measures to prevent conflicts of interest in the activities of credit rating agencies and auditing firms, and in relationships between financial firms and the public sector.

Investigations and Sanctions: Pursue appropriate criminal investigations, in compliance with existing laws and regulations, and impose strong sanctions where corruption, insider trading and other abuses are found.