Corporate governance: Rating of the EU member states guidelines

Abstract

This paper presents a synthesis and analysis of corporate governance guidelines of the twenty-five European Union (EU) member states. The paper focuses on observable and quantifiable aspects of corporate governance including key aspects pertaining to the composition and operation of the board of directors, audit committee, remuneration committee, nomination committee, and other corporate governance policies. Using an Australian corporate governance ranking system, contained in the Horwath Report, the Corporate Governance (CG) Guidelines were analysed and rated. Based on the rating system, thirteen of the twenty-five EU countries had guidelines that were considered to be lacking in several key areas. In contrast, Ireland and the United Kingdom have the most detailed and rigorous corporate governance guidelines. Countries with less developed economic frameworks have the least detailed and rigorous corporate governance guidelines. Finally the specificity of corporate governance guidelines varies greatly between the various countries either due to the system used (one or two tier systems) or whether the country’s legal system is predominately common or statutory law. The aim of the paper is not to determine the compliance of individual companies on their company’s CG Code but to rate the Codes of the countries so as to assess whether there ought to be stricter regulatory measures by the EU on its member states