European Commission Action Plan on Corporate Governance of Listed Companies

On December 12, 2012, the Commission announced an action plan seeking to modernize company law and corporate governance1 (the “Action Plan”), organized around the following three themes:

• Transparency: improving the information companies provide to the marketplace regarding corporate governance, and in return, allowing companies to know the identity of their shareholders and institutional investors’ voting policies;
•  Involving shareholders in governance: monitoring compensation policy and related party transactions;
• Company growth and competitiveness: simplifying the cross-border activities of European companies, particularly small and medium-sized companies.

These three topics will lead to a modification of the rules applicable to the European Company, the transfer of corporate seat within the European Union, or even the “acting in concert” concept.

This memorandum focuses on three specific aspects of the Action Plan which are central to corporate governance issues, namely:

• Oversight of related party transactions;
• Improved implementation of the “comply or explain” principle; and
• Oversight of compensation policy and the “say-on-pay” concept.

If the Action Plan leads to the development of EU legislation, it could profoundly modify the definition of, and regime applicable to, related party transactions in France; it would also lend support to the AMF’s recommendations seeking to improve implementation of the “comply or explain” principle. Finally, it could inspire the government in the development of the draft law on governance of private companies.