Oviedo, 15/04/2002 (Agence Europe) - The European Ministers of the Economy and Finance have invited the group of experts on company law to present an interim report to the Seville Summit on corporate governance and other issues raised by the collapse of Enron, it was stated by Spanish Minister Rodrigo Rato after the informal Ecofin Council in Oviedo, on Saturday. A final report will be presented to the informal Ecofin Council of 7 and 8 September. To this end, the group chaired by Jaap Winter (Unilever's legal advisor) and entrusted with the task of reflecting on the rights of shareholders and on corporate governance, will have its mandate extended to three new issues: the role of the non-executive directors and supervisory councils, the remuneration of company directors, and the management's responsibility in preparing financial information.
On the basis of a note presented by Commissioner Frits Bolkestein (see EUROPE of 13 April, p.7), the ministers noted that most regulatory questions posed by the Enron case are already being taking into consideration in the action plan on financial services, especially in the regulation on accounting standards, the directive on "market abuse" and the directive on pension funds, which are to be adopted at second reading by the Council.
The ministers and the governors of the central banks and the European Central Bank gave a favourable welcome to the new measures announced by the Commission, namely that: - recommendations on the independence of auditors should be presented before the end of the month of April and a "strategic" communication on the EU's auditing priorities should be ready for September. This communication will cover the use of international accounting standards (IAS) for the audit before 2005, requirements for the profession of auditor, the role of the audit committees for companies quoted on the stock exchange, possible adoption of a code of conduct, and revision of the 8th directive on the status of auditors. The European Committee of Securities Regulators is also expected to be invited to examine the case of derived products and the trade in derived products outside regulated markets. Finally, a study on the role of quotation agencies and of financial analysts is to be conducted.
During the debate, Belgium and France presented a number of guidelines. In a letter addressed to his counterparts before the Council, French Minister for the Economy and Finance Laurent Fabius identifies a series of questions to be taken into consideration: 1) revision of international standards in the light of the Enron affair; 2) strengthening of the independence of auditors, for example by making double audit compulsory for consolidated accounts of companies or banning auditors from providing consultancy services to companies whose accounts they are to audit; 3) improvements to the legislation on corporate governance, mainly by guaranteeing transparency of directors' salaries and of transactions carried out by members of the management of a company on its share capital; 4) greater transparency of the international financial system, for derived products, non-regulated markets and off shore financial centres especially; and 5) enhanced self-control of auditors, through annual reports or the rotation of auditors responsible for a company.
Some of the above considerations should be covered by the Commission's recommendations on the independence of auditors, above all requesting the rotation of auditors and demanding transparency of services provided by audit firms to companies that they control. "The aim is to establish investor confidence in Europe, an idea that underlies the action plan for financial services, and prevent an Enron case from happening again", said Commissioner Bolkestein.