EUROPE - Michel Barnier, EU Commissioner for Internal Markets and Service, has confirmed that the Commission will publish a draft green paper on strengthening corporate governance at financial institutions later this month.

Speaking at a meeting of the Economic and Monetary Affairs Committee (ECON) earlier this week, Barnier said the green paper would be published in May and is expected to include measures to strengthen control and risk management in institutions and directors' liability.

He also suggested the paper could include broader reflections on corporate governance in listed companies and corporate social responsibility.

Currently European corporate governance is formed of a combination of existing rules mainly relating to mergers and acquisitions and shareholder rights, alongside recommendations on the inclusion of independent directors and director's activities.

However, the strength of corporate governance differs widely between member states, with the UK planning to improve its work in this area as a result of the findings of the Walker Review. This includes the introduction of a Stewardship Code for Institutional Investors, which the Financial Reporting Council (FRC) will be encouraging non-UK institutions to adopt on a voluntary basis. (See earlier IPE articles: Walker review calls for investors' stewardship code; UK governance code to target investor communication and FRC seeks overseas feedback on Stewardship Code)

It had been suggested that the Commission was working on the issue after Barnier mentioned corporate governance three times in different speeches in the first few months of the year (See earlier IPE article: Imminent EC corporate governance code raises pension hackles).

At a meeting with representatives of the financial section in London in April he told attendees that the key to true regulatory reform starts from within companies.

He stated: "Proper risk management must be at the core. We need stronger corporate governance, better internal control. More responsible shareholders. And supervisors should be able to step in and act if institutions become too complex to supervise."

"I am starting this important work stream with a Green Paper on corporate governance in financial institutions. And I will extend this work also to non-financial companies."

It is expected the draft paper will be published towards the end of May before entering a consultation period.

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