EUROPE – The “equitable treatment of shareholders” is one of the tenets in a new set of European corporate governance principles unveiled by a group of consultants today.

The European Corporate Governance Service, an alliance of governance organisations headed by the UK’s Pension & Investment Research Consultants, have launched eight corporate governance principles for European companies.

First on the list is the “equitable treatment of shareholders”. “ECGS supports one share one vote and the elimination of all anti-takeover provisions which serve to entrench management,” the principles state.

“The principles represent a new initiative to bring together current best practice standards in corporate governance from across Europe,” the group said.

“They form the bedrock of the European Corporate Governance Service, which provides analysis of large European companies on a full range of governance issues together with voting advice for a variety of institutional clients, all produced by local market experts.”

“The Principles, which represent a consensus of the eight research organisations that make up ECGS, provide core standards against which to judge Europe's leading companies,” said Alan MacDougall, managing director of PIRC.

The ECGS noted that current regulatory efforts have centred on national codes of best practice. “Ultimately, however, ECGS considers there is a need to assess the largest European companies against a common set of standards.”

The principles are designed to accommodate the plurality of governance systems and processes found across Europe, but to go beyond other international guidelines in spelling out what companies must do to meet best practice.

The principles:

Equitable treatment of shareholders
The auditing process
Separation of roles at the head of the company
Board composition
Independent board committees
Board diversity
Corporate disclosure
Directors’ remuneration

ECGS comprises:
Centro Info (Switzerland)
Corporate Governance Spain (Spain)
DSW (Germany)
Dutch Sustainability Research (Netherlands)
GES Investment Services (Sweden)
PIRC (UK, managing member)
Proxinvest (France)
Studio Investimenti e Mobiliari (Italy)

A joint study released this week by Georgia State University and Institutional Shareholder Services found a direct correlation between corporate governance and company performance.

“Our findings reveal that companies with weaker corporate governance perform more poorly, are less profitable and have higher volatility than do firms with stronger corporate governance,” said Georgia State’s Dr. Lawrence Brown.