FINANCIAL TIMES: French call for common standards: “Scandals such as Parmalat, the Italian dairy company that collapsed under €14bn ($18.5bn) of debt; Ahold, the Dutch retailer; and Royal Dutch/Shell's reserves debacle have given European corporate governance reforms fresh impetus.” (ShellNews.net) 14 Jan 05
By Peggy Hollinger in Paris
Published: January 14 2005
The French stock market regulator is calling for a common European standard on internal corporate controls, and as a first step has set up a working committee to develop more precise guidelines for French companies.
The AMF, presenting its progress report on corporate governance in France, yesterday said it planned to approach the European Commission in a few months with the initial findings of its working committee.
"Why draw up 25 standards for the 25 countries of the EU if we can create a single European reference?" said Michel Prada, president of the AMF.
Scandals such as Parmalat, the Italian dairy company that collapsed under €14bn ($18.5bn) of debt; Ahold, the Dutch retailer; and Royal Dutch/Shell's reserves debacle have given European corporate governance reforms fresh impetus. However, suggestions that wide-ranging European corporate governance standards should be imposed have sparked strong criticism from many countries.
Jaap Winter, who heads the group of corporate law experts advising the EU on better standards, recently warned against pushing cross-border convergence too quickly. Yesterday, the AMF said the working committee would involve representatives from all market participants, accountants, companies and other interested parties.
"First, we have a national need to clarify for French companies what they need to disclose," said Gerard Rameix, AMF director. "But I think the exercise is not sustainable only at a national level."
Since August 2003, French companies have had to report to shareholders on internal controls and the organisation and performance of their boards.
Mr Rameix said the AMF report showed that French companies had made progress during 2004. However, there was much still to be done, he said, as many companies had interpreted the rules differently. "It has been a very important first step, but it is still a first step. Now we have to be more precise."
In its survey of 118 companies, the AMF found that two-thirds of companies and virtually all in the CAC 40 leading index, had independent directors on the board. Some 58 per cent of companies said they had remuneration committees but they failed to lay out the criteria by which variable performance was judged.
On internal controls, the AMF said the absence of a common standard meant a wide divergence in what was disclosed. This could act as a hindrance in evaluating the relative effectiveness of a company's risk management, the AMF said.
While more than 90 per cent of companies described in their reports the objectives and procedures of internal controls, only half set out their principal risks.
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