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2021 | OriginalPaper | Chapter

6. Integrating Sustainability in EU Corporate Governance Codes

Authors : Michele Siri, Shanshan Zhu

Published in: Sustainable Finance in Europe

Publisher: Springer International Publishing

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Abstract

In the light of the strong commitment by the EU in undertaking a sustainable path towards the goals set by the Paris Agreement and the UN 2030 Agenda, and the prospected EU initiatives concerning the establishment of a sustainable corporate governance, it is more pressing than ever evaluating how companies can truly integrate a long-term sustainable approach in their strategies and operations, and therefore whether corporate governance codes could provide a useful tool towards such objectives. Many authors investigated the effective implementation of corporate governance codes, but a few considered the role of the codes in promoting environmental and social responsibility. The aim of the chapter is to comparatively evaluate the most recent attempts to integrate sustainability considerations in corporate governance codes of listed companies within the EU Member States, in order to understand if such progress is on the way and which best practices could be taken into consideration and disseminated by the EU authorities in the years to come.

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Footnotes
1
See, for example, Kirkpatrick, G. (2009). “The Corporate Governance Lessons from the Financial Crisis”. OECD Journal of Financial Market Trends, 1, 61; and EU Commission, Green Paper, Corporate governance in financial institutions and remuneration policies, Bruxelles, 284 final, 2010. For a critical evaluation in relation to the banking sector, see: Fahlenbrach, R. & Stulz, R.M. (2010). “Bank CEO Incentives and the Credit Crisis”. Journal of Financial Economics, 99(1), 11; Hopt, Klaus J., Better Governance of Financial Institutions (April 1, 2013). “Corporate Governance of Banks and Other Financial Institutions After the Financial Crisis”. Journal of Corporate Law Studies, 13 Part 2 (2013), 219–253 (Part B), “Corporate Governance of Banks after the Financial Crisis”, in E. Wymeersch, K.J. Hopt, and G. Ferrarini (eds.), Financial Regulation and Supervision, a Post-crisis Analysis. Oxford University Press 2012, pp. 337–367 (Part A), ECGI—Law Working Paper No. 207, Available at SSRN: https://​ssrn.​com/​abstract=​2212198; Mülbert, Peter O., Corporate Governance of Banks after the Financial Crisis—Theory, Evidence, Reforms (April 2010). ECGI—Law Working Paper No. 130/2009, Available at SSRN: https://​ssrn.​com/​abstract=​1448118 or http://​dx.​doi.​org/​10.​2139/​ssrn.​1448118; Beltratti, Andrea, & Stulz, Rene M., Why Did Some Banks Perform Better during the Credit Crisis? A Cross-Country Study of the Impact of Governance and Regulation (July 13, 2009). Charles A Dice Center Working Paper No. 2009-12, Fisher College of Business Working Paper No. 2009-03-012, Available at SSRN: https://​ssrn.​com/​abstract=​1433502 or http://​dx.​doi.​org/​10.​2139/​ssrn.​1433502 (with mixed results about the role of corporate governance during the crisis).
 
2
See High-Level Expert Group on Sustainable Finance (HLEG) (2018). Final Report, 38.
 
3
European Commission, Consultation document: Renewed sustainable finance strategy (8 April 2020), p. 37.
 
4
EU Commission, Inception Impact Assessment, Sustainable corporate governance, Ref. Ares(2020)4034032—30/07/2020.
 
5
EU Commission, Communication on the European Green Deal, 11 December 2019, COM(2019) 640 final p. 17.
 
6
See, for example: Wymeersch, E. (2013). “European Corporate Governance Codes and Their Effectiveness”, in M. Belcredi and G. Ferrarini (eds.), Boards and Shareholders in European Listed Companies Facts, Context and Post-crisis Reforms. Cambridge University Press, 67–142; Böckli, P., Davies, P.L., Ferran, E., Ferrarini, G., Garrido Garcia, J.M., Hopt, K.J., Pietrancosta, A., Pistor, K., Roth, M., Skog, R.R., Soltysinski, S., Winter, J.W., & Wymeersch, E.O. (2014). Making Corporate Governance codes More Effective: A Response to the European Commission’s Action Plan of December 2012. Oxford Legal Studies Research Paper No. 56/2014; Ferrero-Ferrero, I., & Ackrill, R. (2016). “Europeanization and the Soft Law Process of EU Corporate Governance: How Has the 2003 Action Plan Impacted on National Corporate Governance Codes?” Journal of Common Market Studies, 54(4), 878–895; Stiglbauer, M., & Velte, P. (2014). “Impact of Soft Law Regulation by Corporate Governance Codes on Firm Valuation: The Case of Germany”. International Journal of Business in Society, 14, 395–406; Bianchi, M., Ciavarella, A., Novembre, V., & Signoretti, R. (2011). “Comply or Explain: Investor Protection Through the Italian Corporate Governance Code”. Journal of Applied Corporate Finance, 23(1), 107–121; and RiskMetrics Group et al. (2009). Study on Monitoring and Enforcement Practices in Corporate Governance in the Member States. Study commissioned by the European Commission.
 
7
See Sjåfjell, B. (2016). “When the Solution Becomes the Problem: The Triple Failure of Corporate Governance Codes”, in J.J. Du Plessis and C.K. Low (eds.), Corporate Governance Codes for the 21st Century: International Perspectives and Critic, 23–55; Szabó, D.G., & Sørensen, K.E. (2013). “Integrating Corporate Social Responsibility in Corporate Governance Codes in the EU”. European Business Law Review, 24(6), 781–828.
 
8
See Szabó, D.G., & Sørensen, K.E. (2013). “Integrating Corporate Social Responsibility in Corporate Governance Codes in the EU”. European Business Law Review, 24(6), 781–828.
 
9
Id.
 
10
See Sjåfjell, B. (2016). “When the Solution Becomes the Problem: The Triple Failure of Corporate Governance Codes”, in J.J. Du Plessis and C.K. Low (eds.), Corporate Governance Codes for the 21st Century: International Perspectives and Critic, 23–55.
 
11
Communication from the Commission to the European Parliament, the European Council, the Council, the European Economic and Social Committee and the Committee of the Regions the European Green Deal, COM/2019/640 final.
 
12
European Commission. Communication from the Commission a Sustainable Europe for a Better World: A European Union Strategy for Sustainable Development, COM/2001/0264 final (15 May 2001).
 
13
Cadbury, A. (1992), The Financial Aspects of Corporate Governance (Cadbury Report), London, UK: The Committee on the Financial Aspect of Corporate Governance (The Cadbury Committee) and Gee and Co, Ltd, p. 15, §2.5.
 
14
Boyd, Colin. (1996). “Ethics and Corporate Governance: The Issues Raised by the Cadbury Report in the United Kingdom.” Journal of Business Ethics, 15(2), 167–182.
 
15
Gerner-Beuerle, Carsten. (2016). “Diffusion of Regulatory Innovations: The Case of Corporate Governance Codes”. Journal of Institutional Economics, 13(2) (October 26), 271–303.
 
16
See Clarke, T. (2007). International Corporate Governance. Routledge, 175–179; Wymeersch, E. (2008). “The Corporate Governance ‘Codes of Conduct’ Between State and Private Law”, in R. Zimmermann et al. (eds.), Globalisierung und Entstaatlichung des Rechts (Mohr Siebeck) vol 2, 66–72; and Zattoni, A., & Cuomo, F. (2008). “Why Adopt Codes of Good Governance? A Comparison of Institutional and Efficiency Perspectives”. Corporate Governance: An International Review, 16(1), 6–7.
 
17
See, for example, Guido Ferrarini, “CRD IV and the Mandatory Structure of Bankers’ Pay”, in ECGI Law Working paper Series, ECGI—Law Working Paper No. 289, 2015, p. 20; Mülbert, Peter O., & Wilhelm, Alexander (2015). “CRD IV Framework for Banks’ Corporate Governance”, in Danny Busch and Guido Ferrarini (eds.), European Banking Union. Oxford University Press, 155, 196–197.
 
18
Directive 2006/46/EC of 14 June 2006 amending Council Directives 78/660/EEC on the annual accounts of certain types of companies, 83/349/EEC on consolidated accounts, 86/635/EEC on the annual accounts and consolidated accounts of banks and other financial institutions and 91/674/EEC on the annual accounts and consolidated accounts of insurance undertakings.
 
19
EU Commission Communication, Action Plan: European company law and corporate governance - a modern legal framework for more engaged shareholders and sustainable companies, COM/2012/0740 final.
 
20
In this regard, consider Directive 2013/50/EU (‘Transparency Directive’) revised in 2013, and the recent Directive 2017/828 (‘Shareholder Rights Directive II’) replacing the 2007 version.
 
21
EU Commission, Recommendations of 9 April 2014 on the quality of corporate governance reporting (‘comply or explain’).
 
22
EU Commission. Communication from the Commission to the European Parliament, the European Council, the Council, the European Central Bank, the European Economic and Social Committee and the Committee of the Regions, Action Plan: Financing Sustainable Growth, COM (2018) 97 final (March 2018).
 
23
European Commission, Communication from the Commission A Sustainable Europe for a Better World: A European Union Strategy for Sustainable Development, COM/2001/0264 final.
 
24
EU Commission, Europe 2020: A strategy for smart, sustainable and inclusive growth, COM(2010) 2020 final.
 
25
UN, Paris Agreement on Climate Change, UN Doc. FCCC/CP/2015/L.9/Rev.1 (12 December 2015).
 
26
EU Commission, Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, Next steps for a sustainable European future European action for sustainability, COM(2016) 739 final.
 
27
Communication from the Commission to the European Parliament, the European Council, the Council, the European Economic and Social Committee and the Committee of the Regions the European Green Deal, COM/2019/640 final.
 
28
In accordance with Article 2 of the same directive, in 2017 the EU Commission published some voluntary guidelines on methodology for reporting non-financial information in order “to help companies disclose high quality, relevant, useful, consistent and more comparable non-financial information in a way that fosters resilient and sustainable growth and employment, and provides transparency to stakeholders.” The EU Commission further integrated such guidelines to improve the corporate disclosure of climate-related information in line with recommendations made by the EU Technical Expert Group on Sustainable Finance. European Commission. See Guidelines on non-financial reporting 2017/C 215/01 and European Commission. Guidelines on Non-Financial Reporting: Supplement on Reporting Climate-Related Information, C (2019) 4490 Final (17 June 2019). Available online: https://​ec.​europa.​eu/​finance/​docs/​policy/​190618-climate-related-information-reporting-guidelines_​en.​pdf (accessed on 28 September 2019).
 
29
Such directive applies, specifically, to “large undertakings which are public-interest entities exceeding on their balance sheet dates the criterion of the average number of 500 employees during the financial year. See Article 19a of the Non-Financial Reporting Directive.”
 
30
Recital 16 of the Non-Financial Reporting Directive requires that “statutory auditors and audit firms should only check that the non-financial statement or the separate report has been provided’ and leaves to the Member States the discretionary power to ‘require that the information included in the non-financial statement or in the separate report be verified by an independent assurance services provider.” The lack of mandatory third-party verification of non-financial statements reduces their reliability level. See Siri, M., & Zhu, S. (2019). “Will the EU Commission Successfully Integrate Sustainability Risks and Factors in the Investor Protection Regime? A Research Agenda”. Sustainability, 11, 1–23.
 
31
See ESMA, Report Enforcement and regulatory activities of European enforcers in 2019 (April 2020) and Alliance for Corporate Transparency, 2019 Research Report: An analysis of the sustainability reports of 1000 companies pursuant to the EU Non-Financial Reporting Directive (February 2020).
 
32
See ESMA, Report Undue short-term pressure on corporations (18 December 2019).
 
33
Regulation (EU) 2019/2088 of 27 November 2019 on sustainability‐related disclosures in the financial services sector.
 
34
Communication from the Commission to the European Parliament, the European Council, the Council, the European Economic and Social Committee and the Committee of the Regions the European Green Deal, COM/2019/640 final, Annex.
 
35
https://​ec.​europa.​eu/​info/​law/​better-regulation/​have-your-say/​initiatives/​12129-Revision-of-Non-Financial-Reporting-Directive/​public-consultation. See Commission, ‘Consultation strategy for the revision of the Non-Financial Reporting Directive – Background document’ (20 February 2020).
 
36
See EU Commission, Summary Report of the Public Consultation on the Review of the Non-Financial Reporting Directive, Ares(2020)3997889—29/07/2020, available at https://​ec.​europa.​eu/​info/​law/​better-regulation/​have-your-say/​initiatives/​12129-Revision-of-Non-Financial-Reporting-Directive/​public-consultation.
 
37
See Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the establishment of a framework to facilitate sustainable investment, and amending Regulation (EU) 2019/2088.
 
38
Regulation (EU) 2019/2089 of the European Parliament and of the Council of 27 November 2019 amending Regulation (EU) 2016/1011 as regards EU Climate Transition Benchmarks, EU Paris-aligned Benchmarks and sustainability-related disclosures for benchmarks.
 
41
EU Commission. Communication from the Commission to the European Parliament, the European Council, the Council, the European Central Bank, the European Economic and Social Committee and the Committee of the Regions, Action Plan: Financing Sustainable Growth, COM (2018) 97 final (March 2018).
 
42
The 10 key actions are: a) establishing an EU classification system for sustainable activities; (b) creating standards and labels for green financial products; (c) fostering investment in sustainable projects; (d) incorporating sustainability when providing financial advice; (e) developing sustainability benchmarks; (f) better integrating sustainability in ratings and market research; (g) clarifying institutional investors’ and asset managers’ duties; (h) incorporating sustainability in prudential requirements; (i) strengthening sustainability disclosure and accounting rule-making; and (l) fostering sustainable corporate governance and attenuating short-termism in capital markets. See also Siri, M., & Zhu, S. (2019). “Will the EU Commission Successfully Integrate Sustainability Risks and Factors in the Investor Protection Regime? A Research Agenda”. Sustainability, 11, 1–23.
 
43
EU Commission, n 740, 11.
 
44
Lise Smit, Claire Bright, Robert McCorquodale, Matthias Bauer, Hanna Deringer, Daniela Baeza- Breinbauer, Francisca Torres-Cortés, Frank Alleweldt, Senda Kara and Camille Salinier and Héctor Tejero Tobed, Study on due diligence requirements through the supply chain, Final report (January 2020), available at https://​op.​europa.​eu/​en/​publication-detail/​-/​publication/​8ba0a8fd-4c83-11ea-b8b7-01aa75ed71a1/​language-en.
 
46
Ibidem, p. 10.
 
47
According to the study, these are: (1) directors’ duties and company’s interest tendency to favour the short-term maximization of shareholder value; (2) growing pressures from investors with a short-term horizon; (3) companies lack of a strategic perspective over sustainability; (4) board remuneration structures that incentivise the focus on short-term shareholder value; (5) current board composition inadequacy to support a shift towards sustainability; (6) current corporate governance frameworks and practices insufficient stakeholder engagement and involvement; and (7) limited enforcement of the directors’ duty to act in the long-term interest of company.
 
48
EU Commission, Inception Impact Assessment, Sustainable corporate governance, Ref. Ref. Ares(2020)4034032—30/07/2020.
 
49
See, for example, Roe, Mark J. and Spamann, Holger and Fried, Jesse M. and Wang, Charles C.Y., The European Commission’s Sustainable corporate governance Report: A Critique (October 14, 2020). European Corporate Governance Institute—Law Working Paper 553/2020, available at SSRN: https://​ssrn.​com/​abstract=​3711652 or http://​dx.​doi.​org/​10.​2139/​ssrn.​3711652. See also Ringe, W.-G., Bassen, A., Lopatta, K., EC Corporate Governance Initiative Series: “The EU Sustainable Corporate Governance Initiative—Room for Improvement”, Opinion (15 Oct 2020), available at https://​www.​law.​ox.​ac.​uk/​business-law-blog/​blog/​2020/​10/​ec-corporate-governance-initiative-series-eu-sustainable-corporate.
 
50
Consider, one for all, Larry Fink’s Letter to CEOs, available at: https://​www.​blackrock.​com/​corporate/​investor-relations/​larry-fink-ceo-letter.
 
51
See, for example, Wymeersch, E. (2013). “European Corporate Governance Codes and Their Effectiveness”, in M. Belcredi & G. Ferrarini (Eds.), Boards and Shareholders in European Listed Companies Facts, Context and Post-crisis Reforms. Cambridge University Press, 67–142; Böckli, P., Davies, P.L., Ferran, E., Ferrarini, G. and Garrido Garcia, J.M., Hopt, K.J., Pietrancosta, A., Pistor, K., Roth, M., Skog, R.R., Soltysinski, S., Winter, J.W., & Wymeersch, E.O. (2014). Making Corporate Governance Codes More Effective: A Response to the European Commission’s Action Plan of December 2012. Oxford Legal Studies Research Paper No. 56/2014; Ferrero-Ferrero, I., & Ackrill, R. (2016). “Europeanization and the Soft Law Process of EU Corporate Governance: How Has the 2003 Action Plan Impacted on National Corporate Governance Codes?” Journal of Common Market Studies, 54(4), 878–895; Stiglbauer, M., & Velte, P. (2014). “Impact of Soft Law Regulation by Corporate Governance Codes on Firm Valuation: The Case of Germany”. International Journal of Business in Society, 14, 395–406; Bianchi, M., Ciavarella, A., Novembre, V., & Signoretti, R. (2011). “Comply or Explain: Investor Protection Through the Italian Corporate Governance Code”. Journal of Applied Corporate Finance, 23(1), 107–121; and RiskMetrics Group et al. (2009). Study on Monitoring and Enforcement Practices in Corporate Governance in the Member States. Study commissioned by the European Commission.
 
52
See Sjåfjell, B. (2016). “When the Solution Becomes the Problem: The Triple Failure of Corporate Governance Codes”, in J.J. Du Plessis and C.K. Low (eds.), Corporate Governance Codes for the 21st Century: International Perspectives and Critic, 23–55; and Szabó, D.G., & Sørensen, K.E. (2013). “Integrating Corporate Social Responsibility in Corporate Governance Codes in the EU”. European Business Law Review, 24(6), 781–828.
 
53
See Szabó, D.G., & Sørensen, K.E. (2013). “Integrating Corporate Social Responsibility in Corporate Governance Codes in the EU”. European Business Law Review, 24(6), 781–828.
 
54
Id.
 
55
See Sjåfjell, B. (2016). “When the Solution Becomes the Problem: The Triple Failure of Corporate Governance Codes”, in J.J. Du Plessis and C.K. Low (eds.), Corporate Governance Codes for the 21st Century: International Perspectives and Critic, 23–55.
 
56
Austria, Belgium, Bulgaria, Croatia, Republic of Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, and Sweden.
 
57
Szabó, D.G., & Sørensen, K.E. (2013). “Integrating Corporate Social Responsibility in Corporate Governance Codes in the EU”. European Business Law Review, 24(6), 781–828.
 
58
Excepted for the Czech Corporate Governance Code, as only the Czech version was provided and, therefore, the authors had to rely on a software-based translation.
 
59
Data are partially drawn from OECD, The Corporate Governance Factbook, 2019, pp. 43–46.
 
60
OECD Code (2004), p. 11.
 
61
OECD Code (2015), p. 7.
 
62
OECD Code (2015), p. 9.
 
63
UK Code (2018), p. 1 and Principle A.
 
64
OECD Code, 2015, p. 9.
 
65
“The purpose of corporate governance is to help build an environment of trust, transparency and accountability necessary for fostering long-term investment, financial stability and business integrity, thereby supporting stronger growth and more inclusive societies”, G20/OECD Code of Corporate Governance (2015), p. 7.
 
66
UK Code (2018), p. 1.
 
67
(Bulgarian) National Corporate Governance Code (2016), p. 3.
 
68
German Corporate Governance Code (2020), p. 2.
 
69
The X Principles of Corporate Governance of the Luxembourg Stock Exchange (2017), p. 6.
 
70
The Dutch Corporate Governance Code (2016), p. 8.
 
71
The Swedish Corporate Governance Code (2020), p. 2.
 
72
(Portuguese) Corporate Governance Code (2018), p. 11.
 
73
The 2020 Belgian Code on Corporate Governance (2020), p. 3; (Croatia) Corporate Governance Code (2019), p. 6; The X Principles of Corporate Governance of the Luxembourg Stock Exchange (2017), 4; The Dutch Corporate Governance Code (2016), 7.
 
74
Austrian Code of Corporate Governance (2020), p. 9; The 2020 Belgian Code on Corporate Governance (2020), p. 3; The X Principles of Corporate Governance of the Luxembourg Stock Exchange (2017), 4; The Dutch Corporate Governance Code (2016), 7.
 
75
Austrian Code of Corporate Governance (2020), p. 9; The Dutch Corporate Governance Code (2016), 7; (Spain) Good Governance Code of Listed Companies (2020), p. 9.
 
76
The 2020 Belgian Code on Corporate Governance (2020), p. 3; The X Principles of Corporate Governance of the Luxembourg Stock Exchange (2017), 4.
 
77
The X Principles of Corporate Governance of the Luxembourg Stock Exchange (2017), 4.
 
78
OECD Code (2015), IV.
 
79
OECD Code (2015), V. A.
 
80
OECD Code (2015), VI. D. 6.
 
81
OECD Code (2015), VI C.
 
82
UK Code (2018), Provision 18.
 
83
UK Code (2018), Principle P.
 
84
Italian Corporate Governance Code (2020), Principle I.
 
85
Italian Corporate Governance Code (2020), Principle XV.
 
86
Italian Corporate Governance Code (2020), Principle XIII.
 
87
(Spain) Good Governance Code of Listed Companies (2020), Recommendation 12, p. 25.
 
88
Ibidem.
 
89
Austrian Code of Corporate Governance (2020), Preamble; The 2020 Belgian Code On Corporate Governance (2020), §2.1, 2.2; German Corporate Governance Code (2020), p. 2; The Dutch Corporate Governance Code (2016), §1.1.1; and The Swedish Corporate Governance Code (2020), Principle 3.
 
90
Corporate governance code of listed corporations (2018), §1, §24.1.1 and §12.1.
 
91
The Dutch Corporate Governance Code (2016), §1.1.1, v) and vi).
 
92
(Denmark) Recommendations on Corporate Governance (2019), § 2.2.
 
93
(Bulgarian) National Corporate Governance Code (2016), §42.
 
94
(Malta) The Code of Principles of Good Corporate Governance, Principle 12.
 
95
(Malta) The Code of Principles of Good Corporate Governance, Supporting Principles under Principle 12.
 
96
The X Principles of Corporate Governance of the Luxembourg Stock Exchange (2017), Principle 9; and (Spain) Good Governance Code of Listed Companies (2020), III.3.5.
 
97
(Spain) Good Governance Code of Listed Companies (2020), III.3.5.
 
98
The X Principles of Corporate Governance of the Luxembourg Stock Exchange (2017), Guideline under Recommendation 9.4.
 
99
OECD Corporate Governance Code (2015), 9.
 
100
See Trade Union Advisory Committee (TUAC) Secretariat, The review process of the OECD Principles of Corporate Governance, 24 September 2015.
 
101
OECD Corporate Governance Code (2015), IV. A.
 
102
OECD Corporate Governance Code (2015), IV. E.
 
103
OECD Corporate Governance Code (2015), IV. C.
 
104
OECD Corporate Governance Code (2015), IV. A, B, E.
 
105
OECD Corporate Governance Code (2015), IV. C, D.
 
106
OECD Corporate Governance Code (2015), IV. C.
 
107
OECD Corporate Governance Code (2015), VI C.
 
108
(repres) Good Governance Code of Listed Companies (2020), Recommendation 12.
 
109
(Bulgarian) National Corporate Governance Code (2016), §38; The Dutch Corporate Governance Code (2016), p. 8.
 
110
(Croatian) Corporate Governance Code (2019), p. 23.
 
111
Slovenian Corporate Governance Code for Listed Companies (2016), p. 7.
 
112
(Croatian) Corporate Governance Code (2019), p. 23.
 
113
Corporate Governance Code for Slovakia (2016), p. 17.
 
114
Slovenian Corporate Governance Code for Listed Companies (2016), p. 7.
 
115
Corporate Governance Code for Slovakia (2016), p. 17.
 
116
(Bulgarian) National Corporate Governance Code (2016), §38.
 
117
(Bulgarian) National Corporate Governance Code (2016), §39; The (Lithuanian) Corporate Governance Code for the Companies Listed on NASDAQ OMX Vilnius (2010), Principe 9.1; (Croatian) Corporate Governance Code (2019), p. 23; Corporate Governance Code for Slovakia (2016), p. 17.
 
118
(Bulgarian) National Corporate Governance Code (2016), §42–43, (Czech) Corporate Governance Code based on the OECD Principles (2004), p. 18; The (Lithuanian) Corporate Governance Code for the Companies Listed on NASDAQ OMX Vilnius (2010), Principle 9.3; Slovenian Corporate Governance Code For Listed Companies (2016), p. 8; The (Maltese) Code Of Principles Of Good Corporate Governance, Principle 4.
 
119
Corporate Governance Code for Slovakia (2016), p. 18, (Czech) Corporate Governance Code based on the OECD Principles (2004), p. 18.
 
120
The (Lithuanian) Corporate Governance Code for the Companies Listed on NASDAQ OMX Vilnius (2010), Principle 9.2, Corporate Governance Code for Slovakia (2016), p. 17.; Slovenian Corporate Governance Code for Listed Companies (2016), p. 8.
 
121
Slovenian Corporate Governance Code for Listed Companies (2016), p. 8.
 
122
Corporate Governance Code for Slovakia (2016), p. 17.
 
123
Slovenian Corporate Governance Code for Listed Companies (2016), p. 10.
 
124
Hellenic Corporate Governance Code for Listed Companies (2013), p. 30.
 
125
OECD Code (2015), VI.G.
 
126
OECD Code (2015), IV.D.
 
127
UK Code (2018), Provision 5.
 
128
This is the case for Austria, Croatia, Czech Republic, Germany, Denmark, Finland, France, Hungary, Luxembourg, Netherlands, Poland, Sweden, Slovenia, Slovak Republic, Spain, Greece, Ireland, and Portugal. See Conchon, A., Board-level employee representation rights in Europe. Facts and trends. Report 121, ETUI (2011). See also: https://​www.​worker-participation.​eu/​National-Industrial-Relations/​Across-Europe/​Board-level-Representation.
 
129
It should be noted that—in relation to Poland, Ireland, and Portugal—board level representation is limited to some state-owned or municipally-owned companies.
 
130
Latvia, Lithuania, Malta.
 
131
Corporate Governance Code for Slovakia (2016), p. 27; The (Maltese) Code of Principles Of Good Corporate Governance, Principle 6.
 
132
German Corporate Governance Code (2019), Recommendation A.2; The Dutch Corporate Governance Code (2016), §2.6.1.; Corporate Governance Code for Slovakia (2016), p. 18; (Lithuanian) The Corporate Governance Code for the Companies Listed on NASDAQ OMX Vilnius (2010), §9.2.
 
133
(Latvian) Principles of Corporate Governance and Recommendations on Their Implementation (2010), §10.1.
 
134
In particular, the annual remuneration policy should compare the compensation of the board of directors and managing director to the development of the average remuneration of employees, and the remuneration policy should specify how the terms and conditions of the company’s employees’ salaries and employment relationships have been taken into account. See Finnish Corporate Governance Code 2020 (2020), p. 68; Hellenic Corporate Governance Code for Listed Companies, p. 32; Corporate governance code of listed corporations (2018), § 24.3.3.
 
135
(Hungarian) Corporate Governance Recommendations, 2018, § 1.6.1; Slovenian Corporate Governance Code For Listed Companies (2016), §29.2; Corporate Governance Code for Slovakia (2016), p. 21.
 
136
OECD Code (2015), VI.E.4.
 
137
UK Code (2018), Principle J.
 
138
UK Code (2018), Provision 23.
 
139
Proposal for a Directive of the European Parliament and of the Council on improving the gender balance among non-executive directors of companies listed on stock exchanges and related measures, COM(2012)614 final, available at: https://​eur-lex.​europa.​eu/​LexUriServ/​LexUriServ.​do?​uri=​COM:​2012:​0614:​FIN:​en:​PDF.
 
141
In Italy, even though both one-tier and two-tier governance models are accepted and can be adopted by companies, the prevailing corporate governance structure is the so-called traditional structure, composed by a board of directors (consiglio di amministrazione) and a board of statutory auditors (collegio sindacale), both appointed by the shareholders’ meeting. See Melis, A. (2000). “Corporate Governance in Italy”. Corporate Governance: An International Review, 8(4) (October). Available at SSRN: https://​ssrn.​com/​abstract=​238590.
 
142
(Italian) Corporate Governance Code (2020), Recommendation 8.
 
143
Austrian Code of Corporate Governance (2020), §52.
 
144
The Dutch Corporate Governance Code (2016), §2.1.5.
 
145
German Corporate Governance Code (2020), Principle 11.
 
146
Spanish) Good Governance Code of Listed Companies (2020), p. 27.
 
147
OECD Code (2015), VI. 6.
 
148
(Spanish) Good Governance Code of Listed Companies (2020), Recommendation 53; The X Principles of Corporate Governance of the Luxembourg Stock Exchange (2017), Recommendation 9.3, Guideline 2; (Denmark) Recommendations on Corporate Governance (2019), p. 22.
 
149
(Spanish) Good Governance Code of Listed Companies (2020), Recommendation 53.
 
150
«Every company having net worth of rupees five hundred crore or more, or turnover of rupees one thousand crores or more or a net profit of rupees five crores or more during any financial year…», §135, Companies Act (2013).
 
151
Harpreet, Kaur. (2020). “Achieving Sustainable Development Goals in India”, in Beate Sjåfjell and Christopher M. Bruner (eds.), Cambridge Handbook of Corporate Law, Corporate Governance and Sustainability. Cambridge University Press, 465.
 
152
See KPMS, India’s CSR Reporting Survey 2019, February 2020, available at: https://​home.​kpmg/​in/​en/​home/​insights/​2020/​02/​india-s-csr-reporting-survey-2019.​html.
 
153
OECD Code (2015), VI. D. 4.
 
154
UK Code (2018), Principle P.
 
155
UK Code (2018), Provision 41.
 
156
Directive 2007/36/EC, as amended by Directive (EU) 2017/828 as regards the encouragement of long-term shareholder engagement. See also Communication from the Commission, Guidelines on the standardised presentation of the remuneration report under Directive 2007/36/EC, as amended by Directive (EU) 2017/828 as regards the encouragement of long-term shareholder engagement.
 
157
EU Commission, Consultation Document. Consultation on the Renewed Sustainable Finance Strategy, April 2020, Question n. 40.
 
158
Velte, Patrick. (2016). Sustainable Management Compensation and ESG Performance—The German Case. Problems and Perspectives in Management. 14. https://​doi.​org/​10.​21511/​ppm.​14(4).​2016.​02; Hong, B., Li, Z., & Minor, D. (2016). “Corporate Governance and Executive Compensation for Corporate Social Responsibility”. Journal of Business Ethics, 136, 199–213.
 
159
Abdelmotaal, H., & Abdel-Kader, M. (2016). “The Use of Sustainability Incentives in Executive Remuneration Contracts: Firm Characteristics and Impact on the Shareholders’ Returns”. Journal of Applied Accounting Research, 17(3), 311–330.
 
160
The X Principles of Corporate Governance of the Luxembourg Stock Exchange (2017), Recommendation 9.3, Guideline 1.
 
161
Corporate governance code of listed corporations (2018), § 24.1.1.
 
162
Principle XV, Italian Corporate Governance Code (2020).
 
163
See ESMA, Report Enforcement and regulatory activities of European enforcers in 2019 (April 2020) and Alliance for Corporate Transparency, 2019 Research Report: An analysis of the sustainability reports of 1000 companies pursuant to the EU Non-Financial Reporting Directive (February 2020).
 
164
OECD Code (2015), V.A. 1-2.
 
165
UK Code (2018), Provision 1.
 
166
EU Commission. Communication from the Commission to the European Parliament, the European Council, the Council, the European Central Bank, the European Economic and Social Committee and the Committee of the Regions, Action Plan: Financing Sustainable Growth, COM (2018) 97 final (March 2018).
 
167
The X Principles of Corporate Governance of the Luxembourg Stock Exchange (2017), Principle 9 and Recommendation 9.1.
 
168
The X Principles of Corporate Governance of the Luxembourg Stock Exchange (2017), Guideline under Principle 9.
 
169
The Swedish Corporate Governance Code (2020), Rule 10.4.
 
170
Corporate Governance Code for Slovakia (2016), Section VI, A.2.i.
 
171
The Dutch Corporate Governance Code (2016), Best Practice Provision 1.1.1., Section VI.
 
172
Some requirements are included only in the related guidelines. See Communication from the Commission—guidelines on non-financial reporting (methodology for reporting non-financial information).
 
173
OECD Code (2015), VI. C.
 
174
OECD Code (2015), VI. 6.
 
175
OECD Code (2015), VI. 7.
 
176
OECD Code (2015), VI. 6.
 
177
OECD Code (2015), V. A. 2.
 
178
UK Code, Provision 25.
 
179
The Bulgarian Code defines an ‘ethical code of conduct’ as “a set of moral and ethical norms, principles and standards of conduct”. (Bulgaria) National Corporate Governance Code (2016), p. 4.
 
180
The 2020 Belgian Code on Corporate Governance (2020), Recommendation 2.18; (Bulgaria) National Corporate Governance Code (2016), p. 4; The X Principles of Corporate Governance of the Luxembourg Stock Exchange (2017), Recommendation 2.3, Guideline 3; Corporate Governance Code for Slovakia (2016), V, C; The Dutch Corporate Governance Code (2016), § 2.5.2.
 
181
The X Principles of Corporate Governance of the Luxembourg Stock Exchange (2017), Principle 5; Corporate governance code of listed corporations (2018), § 20.
 
182
See Sjåfjell, B. (2016). “When the Solution Becomes the Problem: The Triple Failure of Corporate Governance Codes”, in J.J. Du Plessis and C.K. Low (eds.), Corporate Governance Codes for the 21st Century: International Perspectives and Critic, 23–55; and Szabó, D.G., & Sørensen, K.E. (2013). “Integrating Corporate Social Responsibility in Corporate Governance Codes in the EU”. European Business Law Review, 24(6), 781–828.
 
183
However, it should be noted that the Irish Corporate Governance Annex just integrates the main applicable corporate governance code in Ireland, i.e., the UK Corporate Governance Code.
 
Metadata
Title
Integrating Sustainability in EU Corporate Governance Codes
Authors
Michele Siri
Shanshan Zhu
Copyright Year
2021
DOI
https://doi.org/10.1007/978-3-030-71834-3_6

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