1 Financial services:
corporate governance
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10823/10
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COM (10) 284
| Green Paper: Corporate governance in financial institutions and remuneration policies
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| Legal base | —
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| Department | HM Treasury
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| Basis of consideration | Minister's letter of 3 November 2010
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| Previous Committee Report | HC 428-i (2010-11), chapter 19 (8 September 2010)
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| To be discussed in Council | Not known
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| Committee's assessment | Politically important
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| Committee's decision | For debate in European Committee B
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Background
1.1 In June 2010 the Commission published this Green Paper, the
purpose of which was to identify and propose possible solutions
to the failures of corporate governance that contributed to the
financial crisis. It was accompanied by a staff working document:
Corporate governance in financial institutions: Lessons to be
drawn from the current financial crisis, best practices. The Commission
analysed the contribution of failures in the areas of management
of conflicts of interest, board composition, role and functioning,
oversight of risk management and remuneration, shareholder control,
the role of supervisory authorities and auditing. The Commission
put forward a number of proposals for consideration, discussed
how these measures could address the failures of corporate governance
identified and sought to generate a wider debate on these issues.
It raised the question as to whether these issues are better dealt
with at the EU or national level and of the costs and benefits
of greater harmonisation in these areas.
1.2 When we considered the Green Paper, in September
2010, we heard the Government's view that:
- governance shortcomings in
parts of the banking sector contributed to the onset and severity
of the financial crisis;
- a co-ordinated response at the national, EU and
international levels is desirable; and
- it welcomed the Green Paper and would carefully
consider the proposals and respond to them.
We decided that before considering the Green Paper
further we wanted to see the Government's response to it. Meanwhile
the document remained under scrutiny.[1]
The Minister's letter
1.3 The Financial Secretary to the Treasury (Mr Mark
Hoban) now sends us the Government's response to the Green Paper.[2]
He comments that:
- the response puts forward practical
and constructive proposals that build on the principles outlined
in the Green Paper and on the recommendations of the Walker Review,[3]
which has already assessed corporate governance practices in the
UK financial services sector;
- it advocates working closely with the Commission
and other Member States to deliver a strong, principles-based,
framework for financial sector corporate governance;
- on 25 October 2010 the Department of Business,
Innovation and Skills launched a call for evidence, 14 January
2011, on A Long Term Focus for Corporate Britain to consider
whether there are failures in corporate governance and the markets;
and
- although not directly related, this touches on
a number of issues covered in the Green Paper and looks at the
problems of short-termism, investor engagement, directors' remuneration
and the economic case for takeovers.
Conclusion
1.4 We are grateful to the Minister for the information
he gives us. We now recommend the document for debate in European
Committee B to allow Members to consider the suggestions floated
in the Green Paper in the light of the Government's response to
the Commission.
1 See headnote. Back
2
See http://circa.europa.eu/Public/irc/markt/markt_consultations/library?l=/company_law/institutions_remuneratio/public_authorities/government_enpdf/_EN_1.0_&a=d.
Back
3
See http://webarchive.nationalarchives.gov.uk/+/http://www.hm-treasury.gov.uk/d/walker_review_261109.pdf.
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