Reflexive Governance and European Company Law

Abstract

The use of reflexive forms of regulation is growing within the EU, in particular as the open method of coordination ("OMC") is applied to a growing number of contexts including employment policy, social inclusion, enterprise promotion, environmental protection, energy policy, and fundamental human rights. Company law, however, seems to be an exception to this: recent activity has taken the form of "hard law" harmonization through directives, coupled with the stimulation of regulatory competition through judgments of the European Court of Justice in relation to freedom movement, stemming from the Centros case. There is a very limited "company law OMC" in the form of the deliberations of the European Corporate Governance Forum, but there is little evidence here of what proponents of the OMC call "learning from diversity"; instead, the Forum appears to envisage the elimination of country-specific practices which it refers to as "distortions of competition". This paper argues that the lack of a meaningful company law OMC is likely to prove a more serious long-term obstacle to capital market integration than the persistence of inter-country variations in corporate governance practices. The example of labour law shows how functional convergence and a coordinated raising of standards can be achieved by the dovetailing of the OMC with social policy directives. By contrast, the recent failure of the Takeover Directive to impose a uniform model of takeover regulation indicates the limits of top-down modes of harmonization. At the same time, the case of labour law highlights the importance of placing the OMC within a wider framework of legal support for fundamental rights, of the kind which is capable of providing a countervailing force against court-led deregulation.

Keywords: corporate governance, open method of coordination, European company law

JEL Classification: G34, K22, K33