SWEDEN - The European Commission should not seek to blame corporate governance standards in Europe for the financial crisis, Sweden’s AP3 has urged.
The SEK220.8bn (€24.5bn) buffer fund also said no regulation should be introduced to promote more effective monitoring of asset managers by institutional investors on issues of strategy and cost, saying it was already in the interest of investors to monitor these issues.
In its submission for the Green Paper on a Union-wide corporate governance framework, AP3 said the lines separating governance and general regulation of listed companies had begun to blur.
Peter Lundkvist, the fund’s head of corporate governance, said questions from one debate had spilled over into the other.
“It would be a mistake to transpose the failures in the financial sector during the recent crisis to corporate governance of corporations generally,” he said in the submission.
He dismissed the need for further risk management measures, saying it was not necessary to require boards to approve a company’s risk appetite.
“The proposals in this part seem to spill over from the policy thinking regarding financial institutions that are in a specific risk-taking business, and are not well-placed in a debate regarding corporate governance for the broad community of companies,” he argued.
He added that, due to the different legislative systems, as well as already existing self-regulatory and ownership structures in place, it would be “difficult” to establish uniform laws across the EU.
Addressing the relationship between investors and asset managers, AP3 dismissed the idea of regulating the relationship more closely.
The buffer fund argued against the introduction of a law promoting effective engagement between the two parties, saying it was already in investors’ interest to monitor strategy, costs and trading.
It further dismissed the notion that measures should be taken to monitor performance of long-term investors, saying it believed in both transparency and disclosure “regardless of investment horizon” and that the issue was best addressed through self-regulation.
Lindquist said AP3 did not see “any further need” for regulation in Sweden.
Instead, it would be beneficial to “develop and share” the best practices identified in the most successful existing frameworks, to which he counted Sweden’s system, as well as the UK’s Stewardship Code and the European Fund and Asset Management Association’s Code for External Governance.
The submission was keen to stress that, should any regulation be introduced, no consideration regarding the size of listed companies should be made and that it should apply to all listed entities.
Lundkvist further said that the EU would be wise to differentiate the roles of chair of the board and chief executive, something already guaranteed under Swedish law.
He explained that, due to the board’s role in monitoring management, as well as hiring and firing any company directors, it would be “highly inappropriate” for there to be a crossover between the two positions.