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Boards in Europe – Accountability and Convergence

Paul L. Davies

University of Oxford- Faculty of Law

Klaus J. Hopt

Max Planck Institute for Comparative and International Private Law; European Corporate Governance Institute (ECGI)

April 1, 2013

American Journal of Comparative Law 61 (2013) 301-375
ECGI - Law Working Paper No. 205/2013
Oxford Legal Studies Research Paper No. 40/2013

Corporate boards play a central role in corporate governance and therefore are regulated in the corporate law and corporate governance codes of all industrialized countries. Yet while there is a common core of rules on the boards, considerable differences remain, not only in detail, but sometimes also as to main issues. These differences depend partly on shareholder structure (dispersed or blockholding), partly on path dependent historical, political and social developments, especially employee representation on the board. More recently, in particular with the rise of the international corporate governance code movement there is a clear tendency towards convergence, at least in terms of the formal provisions of the codes. This article analyses the corporate boards, their regulation in law and codes and their actual functioning in nine European countries (Belgium, France, Germany, Italy, the Netherlands, Poland, Sweden, Switzerland and the United Kingdom) in a functional and comparative method. Issues dealt with are inter alia board structure, composition and functioning (one tier v. two tier, independent directors, expertise and diversity, separating the chair and the CEO functions, information streams, committees, voting and employee representation) and enforcement by liability rules (in particular conflicts of interest), incentive structures (remuneration) and shareholder activism. The article finds convergence in these European countries due to the pressures of competition, a pro-shareholder change supported by government and institutional investors and, to a certain degree, the impact of the EU. This convergence shows more in the codes and the ensuing practice than in the statutes. On the other side considerable differences remain, in particular as a result of the failure to adopt a mandatory "no frustration" rule for takeovers at EU level and diverging systems of labor codetermination. The result is an unstable balance between convergence and divergence, shareholder and stakeholder influence and European v. national rulemaking.

Number of Pages in PDF File: 67

Keywords: corporate law, corporate boards in Europe, accountability, convergence, two-tier boards, independent directors, diversity, board committees, cumulative voting, labor codetermination, conflicts of interest, enforcement, remuneration, shareholder activism, decision-making

JEL Classification: G3, K22

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Date posted: February 9, 2013 ; Last revised: December 17, 2013

Suggested Citation

Davies, Paul L. and Hopt, Klaus J., Boards in Europe – Accountability and Convergence (April 1, 2013). American Journal of Comparative Law 61 (2013) 301-375; ECGI - Law Working Paper No. 205/2013; Oxford Legal Studies Research Paper No. 40/2013. Available at SSRN: https://ssrn.com/abstract=2212272

Contact Information

Paul L. Davies
University of Oxford- Faculty of Law ( email )
Harris Manchester College
Oxford, OX1 3TD
United Kingdom
Klaus J. Hopt (Contact Author)
Max Planck Institute for Comparative and International Private Law ( email )
Mittelweg 187
D-20148 Hamburg
+49 40 41 90 02 05 (Phone)
+49 40 41 90 03 02 (Fax)

European Corporate Governance Institute (ECGI)
B-1050 Brussels
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Footnotes:  243