Modern Company and Capital Market Problems: Improving European Corporate Governance after Enron

Abstract

Improving European corporate governance after Enron requires rethinking company and capital market regulation and law reforms. This article - which is an updated version (footnotes and references only, summer 2006) of an earlier one published in (2003) 3 Journal of Corporate Law Studies 221-268 - discusses shareholder decision-making; the choice between the one-tier and the two-tier board system; appointment, compensation and audit committees with a majority of independent members; checks on exorbitant payments to the directors; a special investigation procedure and wrongful trading. As to capital markets a European framework rule on prospectus liabilty is proposed. A key problem is the need for loyal and competent intermediaries. Since the 13th Directive is only a compromise solution, the hopes are pinned on the Court to continue its golden share case law. The German Volkswagen Act will be a test case.

Keywords: European corporate governance, company law, board structure, corporate disclosure, control by shareholders and auditors, capital markets law, corporate control, Enron, European corporate governance, 13th Directive

JEL Classification: G18, G3, G38, K22