Ref. Ares(2021)3622164 - 02/06/2021
Minutes of meeting of CAB PRES and CAB JOUROVA with Business Europe on Sustainable
Corporate Governance - 23/04/2021 (videoconference)
Participants: Simona Constantin, CAB JOUROVA; Charmaine HILI, PRES CAB
Pedro Oliveira, Director for Legal Affairs at Business Europe
Business Europe welcomed the possibility to express their views on the Sustainable
Corporate Governance initiative on which they are in contact with about 25 other business
associations and they are all monitoring this closely.
The main views expressed were as fol ows:
On due diligence:
- Businesses have already started to move towards sustainability through big
efforts in recent years, so they are not opposed to this;
- Companies want: legal certainty, level playing field by not leaving too much
room for MS to go beyond the EU level of harmonisation, and complementary
support measures;
- Ensure coherence and avoid overlap with other COM initiatives which include
due diligence aspects;
- The obligations should be of means/best efforts; companies should not be
responsible for harm outside their control; this is also key should there be
liability included;
- Careful treatment of SMEs; either in or out of mandatory obligations, they will
stil be caught by due diligence rules since they are part of supply chains; the
initiative should include elements to support SMEs and the level of their
obligations should be more proportionate;
- No interference with the existing public international law rules under Rome II
and Brussels I Regulations to avoid that parties from all over the world would
sue companies in the EU.
- Attention to extra-territoriality aspects;
On directors ‘duties:
- Overall, the position is more reserved compared to due diligence;
- Concerns about changing the purpose of the company; the objective of
companies is to work for profit, but of course they already do so by considering
stakeholders; instead of harmonisation of national laws/codes on this, maybe a
standard such a B-corp could be considered; being too intrusive risks killing the
market based economic model;
- Questionable if binding rules are needed as regards stakeholders involvement,
since companies already do so;
- Liability: directors should not be liable towards other parties, but only towards
the company; shareholder rights to challenge board decisions exist already, at
different levels in MS; giving legal standing to employees organisations risks
bypassing existing EU and national law providing for clear rights of consultation
and involvement of employees (eg. present in boards in some MS); difficult to
qualify who is an interested party in order to give legal standing for NGOs (the
Col ective Redress Directive is better defined as linked to clear consumer
legislation, but in this SCG proposal the issues are very broadly defined as
human rights, climate, environment). There is also a risk that competitors will
finance law suits.
- Concerns (brought also to the attention of VP Sefcovic and SG) about the Ernst
and Young study on directors ‘duties about which many renown university and
researchers have said that it has methodological flaws and lacks
representativeness given that 1/3 of the companies consulted for the study are
from UK.
On remuneration aspects:
- The Shareholder Rights Directive is a balanced outcome of a very difficult
process; it already includes remuneration requirements and the first reports on
this are due this year; it would not be appropriate to open again now this
Directive;
When asked what would be key elements for a balanced proposal that would still deliver on
the sustainability objective, the views were:
- Due diligence: obligation of means, not results and at process level
(understanding that at principle level would not be sufficient); this should be
proportionate and risk based; it should be commensurate to the size of the
company; enough flexibility should be left to companies to prioritise the level of
due diligence depending also on whether they operate in risky areas or sectors;
include support tools for SMEs; design liability along the OECD guidance which is
accepted by all stakeholders;
- Directors’ Duties: take interests into account as a principle and designed rather
as a recommendation; allow flexibility for how to take into account various
interests;
- Ensure coherence with the Non-financial Reporting Directive and cautiousness
as regards not bypassing labour law.
CAB PRES and CAB JOUROVA thanked for these views and informed about the ongoing
preparatory steps towards the adoption of a legislative proposal on Sustainable Corporate
Governance. They also stated the overall Commission priority of moving towards
sustainability, while acknowledging that it is important to find the right approach and
balance.
