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Original Articles

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

Klaus J HoptMax Planck Institute for Foreign Private and Private International Law in Hamburg.
Pages 221-268 | Published online: 27 Apr 2015

  • See the survey and sources in KJ Hopt, Der Kapitalanlegerschutz im Recht der Banken (Munich, Beck, 1975), 15–50; idem, “Ideelle und wirtschaftliche Grundlagen der Aktien-, Bank- und Börsenrechtsentwicklung im 19. Jahrhundert”, in H Coing/W Wilhelm (eds), Wissenschaft und Kodifikation des Privatrechts im 19. Jahrhundert, vol V, Geld und Banken (Frankfurt, Klostermann, 1980), 128–168; K Lehmann, Die geschichtliche Entwicklung des Aktienrechts bis zum Code de Commerce (Berlin, Heymanns, 1895); H Merkt, Beiträge zur Börsen- und Unternehmensgeschichte (Frankfurt et al, Lang, 2001); PL Davies, Gower's Principles of Modern Company Law (London, Sweet & Maxwell, 6th edn 1997), 18–53.
  • See Senate Committee on Governmental Affairs, The Role of the Board of Directors in Enron's Collapse, 107th Congress, 2d Session, Report 107–70, 8 July 2002. See also WW Bratton, “Enron and the Dark Side of Shareholder Value”, 76 Tulane Law Review 1275 (2002); JC Coffee, “Understanding Enron: It's About Gatekeepers, Stupid”, Business Lawyer 57 (2002) 1403; idem, “Gatekeeper Failure and Reform: The Challenge of Fashioning Relevant Reforms”, Paper Presented to the Syracuse Conference on A Modern Regulatory Framework for Company and Takeover Law in Europe, 29–31 May 2003, to be edited by G Ferrarini/KJ Hopt/J Winter/E Wymeersch.
  • Sarbanes-Oxley Act, 30 July 2002.
  • At an early stage of the discussion in Germany, KJ Hopt, “Ein Debakel à la Enron ist auch in Deutschland denkbar”, Handelsblatt, 21 February 2002, No 37, p 8; E. Wymeersch, “Editorial: Will 2002 Be a Historical Turning Point in the Development of Company Law?” International and Comparative Corporate Law Journal 4 (2002) iii; R Bruce, “Can Europe avoid an Enron?” The Parliament Magazine, 25 November 2002, p 21. Some other German contributions confine themselves to criticising the American corporate governance system, see, eg, GC Schwarz/B Holland, “Enron, WorldCom … und die Corporate-Governance-Diskussion”, Zeitschrift für Wirtschaftsrecht (ZIP) 2002, 1661. This is to be seen in the light of the decline of the number of shareholders since 2001. In Germany in the first half of 2001, 13.5 million persons held shares or investment fund certificates; in the first half of 2002, it was only 11.5 million (figures from the Deutsches Aktieninstitut, Frankfurt, 18 July 2002).
  • France: Nouvelles Régulations Economiques of 2001; Germany: KonTraG of 1998, Transparenzund Publizitätsgesetz of 2002; Italy: Testo unico of 1998 and the reform proposals of the Mirone Commission and the Vietti Commission; see KJ Hopt/PC Leyens, “Board Models in Europe—Recent Developments of Internal Corporate Governance Structures in Germany, the United Kingdom, France and Italy”, in L Timmerman (ed), VOC 1602–400 years of Company Law (The Hague, Kluwer Law International, forthcoming). For Germany, see KJ Hopt, “Corporate Governance in Germany”, in KJ Hopt/E Wymeersch (eds), Capital Markets and Company Law (Oxford, OUP, 2003), 289.
  • See the UK Government's White Paper, Modernising Company Law, July 2002, Cm 5553-I, II. See also the Higgs Report, issued after the completion of this article: Derek Higgs, Review of the Role and Effectiveness of Non-executive Directors (London, DTI, January 2003).
  • Presidency Conclusions, Seville European Council, 21 and 22 June 2002, SN 200/02, p 15.
  • Report of the High Level Group of Company Law Experts on Issues Related to Takeover Bids, European Commission, Brussels, 10 January 2002 (hereinafter: High Level Group Report I). In the meantime, much—though not all—of what the High Level Group recommended in its first report has been taken up by the European Commission in its new draft 13th Directive of 2 October 2002, see infra Section D 3.
  • Report of the High Level Group of Company Law Experts on A Modern Regulatory Framework for Company Law in Europe, European Commission, Brussels, 4 November 2002 (hereinafter: High Level Group Report II). Most recently, on 21 May 2003, the European Commission issued a Communication to the Council and the European Parliament on “Modernising Company Law and Enhancing Corporate Governance in the European Union—A Plan to Move Forward” COM(2003). This action plan follows closely the recommendations of the High Level Group and attributes specific priorities to the different instruments. The first comprehensive international discussion of the High Level Group Reports I and II took place at the Syracuse Conference on A Modern Regulatory Framework for Company and Takeover Law in Europe, 29–31 May 2003, to be edited by G Ferrarini/KJ Hopt/J Winter/E Wymeersch and to be published soon in the UK.
  • M Lutter et al, “Stellungnahme der Group of German Experts on Corporate Law zum Konsultationspapier der High Level Group of Experts on Corporate Law”, Zeitschrift für Wirtschaftsrecht (ZIP) 2002, 1310. A summary of the comments submitted can be found in Annex 3 of the High Level Group Report II p 136 et seq.
  • See supra nn 8 and 9.
  • See recently R Romano, The Advantage of Competitive Federalism for Securities Regulation (Washington DC, American Enterprise Institute Press, 2002) and idem, The Genius of American Corporate Law (Washington DC, American Enterprise Institute Press, 1993). At least for Europe, a more cautious position as to the workable competition of rules and regulators is rightly taken by S Grundmann, “Wettbewerb der Regelgeber im Europäischen Gesellschaftsrecht—jedes Marktsegment hat seine Struktur”, Zeitschrift für Unternehmens- und Gesellschaftsrecht (ZGR) 2001, 783, and by H Merkt, “Das Europäische Gesellschaftsrecht und die Idee des ‘Wettbewerbs der Gesetzgeber’”, Rabels Zeitschrift für ausländisches und internationales Privatrecht (RabelsZ) 59 (1995) 545.
  • High Level Group Report II ch III.6 (p 72 et seq).
  • High Level Group Report II ch III.6 (p 73). The European Commission plans to convene a European Corporate Governance Forum to coordinate corporate governance efforts of member states through a non-legislative Commission initiative. See European Commission, Action Plan, supra n 9, Annex 1: Short Term (2003–2005).
  • High Level Group Report II ch III.4 (p 59 et seq).
  • Forum Europaeum Corporate Group Law, “Corporate Group Law for Europe”, European Business Organization Law Review (EBOR) I (2002) 165 at 207 et seq.
  • In the meantime, the European Commission has done exactly this and has specified the legal forms and priorities it intends to give to the various instruments proposed by the High Level Group in its Second Report.
  • The European Commission plans to mandate a study of the consequences of an approach aimed at achieving a full shareholder democracy (one share/one vote), at least for listed companies. See European Commission, Action Plan, supra n 9, Annex 1: Medium Term (2006–2008).
  • P Myners, Institutional Investment in the UK: A Review (London, HM Treasury, 2001), 89. But for the US, see also R Romano, “Less is More: Making Institutional Investor Activism a Valuable Mechanism of Corporate Governance”, Yale Journal on Regulation 18 (2001) 174; she tries to explain why empirical studies suggest that corporate governance activism has an insignificant effect on targeted firms’ performance. See also the contributions in T Baums/RM Buxbaum/KJ Hopt (eds), Institutional Investors and Corporate Governance (Berlin/New York, de Gruyter, 1994). As to EC regulation see J Welch, “The Sophisticated Investor and the ISD”, in G Ferrarini/KJ Hopt/E Wymeersch (eds), Capital Markets in the Age of the Euro—Cross-Border Transactions, Listed Companies and Regulation (The Hague et al, Kluwer Law International, 2002), 101. As to the responsibilities of institutional investors, see High Level Group Report II ch III.3.3. (p 56 et seq).
  • The European Commission plans to require enhanced disclosure for institutional investors of their investment and voting policies through a directive. See European Commission, Action Plan, supra n 9, Annex 1: Medium Term (2006–2008).
  • Apart from this, the idea of agents watching agents has its shortcomings, in particular if institutional agents watching firm agents have conflicts of interest with other shareholders. See T Woidtke, “Agents watching agents?: Evidence from pension fund ownership and firm value”, Journal of Financial Economics 63 (2002) 99.
  • High Level Group Report II ch III.3.1 and 3.2. (p 47 et seq).
  • The European Commission plans to set up an integrated legal framework to facilitate efficient shareholder communication and decision-making (participation in meetings, exercise of voting rights, cross-border voting) through a directive. See European Commission, Action Plan, supra n 9, Annex 1: Short Term (2003–2005).
  • See J Köndgen, “Duties of Banks in Voting Their Clients’ Stock”, in Baums et al., Institutional Investors and Corporate Governance, supra n 19, 531. A comparative law survey on the proxy systems in Germany, the UK, Spain, France, and Italy can be found in BC Becker, Die institutionelle Stimmrechtsvertretung der Aktionäre in Europa (Frankfurt et al., Lang, 2002).
  • In Anglo-American corporate law this is seen as a general company law doctrine, while in German and other Continental European laws this is considered to be part of general civil law, which applies to all kinds of legal personalities.
  • High Level Group Report I p 20 et seq, p 27 et seq; see the nuanced view of P Davies, Introduction to Company Law (Oxford, OUP, 2002), 266 et seq. See generally H Hansmann, The Ownership of Enterprise (Cambridge, Belknap Press, 1996).
  • See infra B 4.
  • See P Davies/KJ Hopt, “Control Transactions”, in R Kraakman/P Davies/H Hansmann/G Hertig/KJ Hopt/H Kanda/EB Rock (eds), The Anatomy of Corporate Law, A Comparative and Functional Approach (Oxford, OUP, 2004), ch 7: Control transactions.
  • Holzmüller case, German Federal Bundesgerichtshof, Entscheidungen des Bundesgerichtshofes in Zivilsachen (BGHZ) (Köln Berlin, Heymanns 1982) 83, 122.
  • High Level Group Report I p 27 et seq; High Level Group Report II ch III.4.2 (p 64 et seq).
  • As to directors’ remuneration see infra B 3.
  • Mayence Symposium for the 60th Birthday of KJ Hopt: M Lutter, “Comparative Corporate Governance: A German Perspective”, and P Davies, “Board Structure in the UK and Germany: Convergence or Continuing Divergence?” International and Comparative Corporate Law Journal 2 (2000) 423, 435; German version in Zeitschrift für Unternehmens- und Gesellschaftsrecht (ZGR) 2001, 224, 268. See also GF Maassen, An International Comparison of Corporate Governance Models, A Study on the Formal Independence and Convergence of One-Tier and Two-Tier Corporate Boards of Directors in the United States of America, the United Kingdom and the Netherlands (Amsterdam, Spencer Stuart, 2000). See also the Higgs Report, issued after the completion of this article: Derek Higgs, Review of the Role and Effectiveness of Non-executive Directors (London, DTI, January 2003).
  • Davies, supra n 32, p 455.
  • Davies, supra n 32, p 453.
  • In Germany a joint symposium of the two leading commercial and company law reviews, Zeitschrift für das gesamte Handelsrecht und Wirtschaftsrecht (ZHR) and Zeitschrift für Unternehmens- und Gesellschaftsrecht (ZGR), has dealt with this topic; see P Hommelhoff/M Lutter/K Schmidt/W Schön/P Ulmer (eds), Corporate Governance (Heidelberg, Recht und Wirtschaft, 2002).
  • See the Hampel Report (Committee on Corporate Governance, Final Report, London, January 1998), Summary No 10; MR Theisen, “Empirical Evidence and Economic Comments on Board Structure in Germany”, in KJ Hopt/H Kanda/MJ Roe/E Wymeersch/S Prigge (eds), Comparative Corporate Governance (Oxford, OUP, 1998), 259 at 260.
  • High Level Group Report II ch III.4.1.a) (p 59). As to France and Italy see KJ Hopt/PC Leyens, supra n 5.
  • The European Commission plans to give all listed companies a choice through a directive between the two types (monistic/dualistic) of board structures. See European Commission, Action Plan, supra n 9, Annex 1: Medium Term (2006–2008). This has been advocated before by KJ Hopt, “The German Two-Tier Board (Aufsichtsrat), A German View on Corporate Governance”, in KJ Hopt/E Wymeersch (eds), Comparative Corporate Governance—Essays and Materials (Berlin, New York, de Gruyter, 1997) 3 at 14.
  • Council Regulation of 8 October 2001, OJEC L 294/1, 10.11.2001, Art 39 et seq. Two-tier system, Art 43 et seq. The one-tier system; see KJ Hopt, “The European Company (SE) under the Nice Compromise: Major Breakthrough or Small Coin for Europe?” Revue européenne de droit bancaire et financier/European Banking and Financial Law Journal (Euredia) 2000, 465 at 472.
  • Only 4% of all public companies, but 20% of the companies making up the CAC 40-index (for example, Axa, Pinaut-Printemps-Redoute, PSA, and Aventis); see M Cozian/A Viandier/F Deboissy, Droit des sociétés, 15e éd (Paris, Litec, 2002), no 780: P Le Cannu, “Pour une évolution du droit des sociétés anonymes avec directoire et conseil de surveillance”, Bulletin Joly 2000, 483; Y Guyon, “Éloge funèbre de la société à directoire en droit français”, in Liber amicorum Lucien Simont (Brussels, Bruylant, 2002), 733.
  • M Lutter, “Les expériences européennes de cogestion. L'expérience allemande”, and A Schäfer, “Expérience de la cogestion en Allemagne”, in KJ Hopt/M Menjucq/E Wymeersch (eds), La Société Européenne, Organisation juridique et fiscale, intérêts, perspectives (Paris, Dalloz, 2003), 81, 87; P Ulmer, “Paritätische Arbeitnehmermitbestimmung im Aufsichtsrat von Großunternehmen—noch zeitgemäß?” Zeitschrift für das gesamte Handelsrecht und Wirtschaftsrecht (ZHR) 166 (2002) 271; KJ Hopt, “Labor Representation on Corporate Boards: Impacts and Problems for Corporate Governance and Economic Integration in Europe”, 14 International Review of Law and Economics 203 (1994); K Pistor, “Codetermination: A Sociopolitical Model with Governance Externalities”, in M Blair/MJ Roe (eds), Employees and Corporate Governance (Washington, Brookings Institution Press, 1999), p 113.
  • R Krause, “Sarbanes-Oxley Act and deutsche Mitbestimmung”, Zeitschrift für Wirtschafts- und Bankrecht (WM) 2003, 762.
  • KJ Hopt, “Unternehmensführung, Unternehmenskontrolle, Modernisierung des Aktienrechts—Zum Bericht der Regierungskommission Corporate Governance”, in P Hommelhoff et al., Corporate Governance, supra n 35, p 27 at 42 et seq.
  • T Baums (ed), Bericht der Regierungskommission Corporate Governance (Cologne, Otto Schmidt, 2001, hereinafter: German Corporate Governance Commission) comment 314; German Corporate Governance Code (Cromme Commission, 26 February 2002) 5.3.2.
  • Sarbanes-Oxley Act Sec 301(3).
  • German Corporate Governance Commission comment 314.
  • See more details in the context of independent directors infra B 4.
  • A Tunc, “Corporate Law”, in RM Buxbaum/G Hertig/A Hirsch/KJ Hopt (eds), European Business Law, Legal and Economic Analyses on Integration and Harmonization (Berlin/New York, de Gruyter, 1991), 199 at 211 et seq.
  • See KJ Hopt, “Die Haftung von Vorstand und Aufsichtsrat”, in Festschrift für Mestmäcker (Baden-Baden, Nomos, 1996), 909 at 917, 921 et seq.
  • L Enriques, “The Law on Company Directors’ Self-Dealing: A Comparative Analysis”, International and Comparative Corporate Law Journal 2 (2000) 297. See also KJ Hopt, “Self-Dealing and Use of Corporate Opportunity and Information: Regulating Directors’ Conflict of Interest”, in KJ Hopt/G Teubner (eds), Corporate Governance and Directors’ Liabilities (Berlin/New York, de Gruyter, 1985), 285.
  • See KJ Hopt, “Takeovers, Secrecy and Conflicts of Interest: Problems for Boards and Banks”, in J Payne (ed), Takeovers in English and German Law (Oxford, Hart Publishing, 2002), 33.
  • Schedule 2 s 5 (p 113) of the British draft Companies Bill (White Paper, supra n 8, Draft Clauses, Cm 5553-II).
  • See Schedule 2 s 1 et seq. of the British draft Company Bill (White Paper, supra n 8, Draft Clauses, Cm 5553-II).
  • As to the hidden differences between the US and the German business judgment rules see KJ Hopt in Festschrift für Mestmäcker, supra n 49, 919 et seq.
  • See LA Bebchuk/JM Fried/DI Walker, “Managerial Power and Rent Extraction in the Design of Executive Compensation”, 69 University of Chicago Law Review 751 (2002).
  • Supra B 2.
  • High Level Group Report II ch III.4.2 (p 64 et seq).
  • The European Commission plans to foster an appropriate regime for directors’ remuneration through a recommendation. See European Commission, Action Plan, supra n 9, Annex 1: Short Term (2003–2005).
  • Supra B1.
  • BR Cheffins/RS Thomas, “Should Shareholders have a Greater Say over Executive Pay? Learning from the US Experience”, Journal of Corporate Law Studies (JCLS) Dec. 2001, 277 at 315. Yet most recently there have been cases in the UK (for example, Glaxo Smith Kline on 19 May 2003) in which exaggerated remuneration proposals of the board were stopped in the general assembly or not even brought forward to it for fear of negative reactions.
  • The Directors’ Remuneration Report Regs 2002, in force on 1 August 2002, considering accounts for financial years ending after 31 December 2002. The vast majority of companies have March financial year ends, (information by J Rickford, DTI).
  • Answer from the UK to the High Level Group Questionnaire of June 2002.
  • Draft Directors’ Remuneration Report Reg 2002, Part 3 of Schedule 7A, which requires information to be set out concerning the emoluments, share options, long-term incentive plans, pensions, compensation, and excess retirement benefits of each director and, in some cases, of past directors as well. See the Explanatory Note on p 23 (not part of the Regulations).
  • German Corporate Governance Code 5.4.5. But it must be taken into account that under the Code there is a vast legal difference between a recommendation and a suggestion; see P Ulmer, “Der Deutsche Corporate Governance Kodex—ein neues Regulierungsinstrument für börsennotierte Aktiengesellschaften”, Zeitschrift für das gesamte Handelsrecht und Wirtschaftsrecht (ZHR) 166 (2002) 150 at 153 et seq; CH Seibt, “Deutscher Corporate Governance Kodex und Entsprechens-Erklärung (§ 161 AktG-E)”, Die Aktiengesellschaft (AG) 2002, 249 at 250. In May 2003 the German Corporate Governance Commission agreed to change the Code to recommend individual disclosure.
  • German Corporate Governance Code 5.4.5.
  • Linklaters Oppenhoff & Rädler, Wird der Bilanzausweis von Personalaufwand für Stock Option Pläne Pflicht? August 2002; M Adams, “Aktienoptionspläne und Vorstandsvergütungen”, Zeitschrift für Wirtschaftsrecht (ZIP) 2002, 1325 at 1336 et seq; H Havermann (German Accounting Standard Board, pro) and C. Strenger (DWS investment company, contra), “Sollen Aktienoptionen als Kosten in Unternehmensbilanzen verbucht werden?” Handelsblatt 7.10.2002, No 192, p 8.
  • “Der schwierige Weg der Aktienoptionen in die Bilanz, SFS 123 (Statement of Financial Accounting Standard)”, Frankfurter Allgemeine Zeitung (FAZ) 22.7.02 No 167 p 19; for the US, see Adams, supra n 66: 13% for the S&P 500 US companies.
  • For example, Coca Cola Corp., General Electric, Citigroup, Procter & Gamble, DuPont; in toto more than 120 US companies. See “Unternehmen sollen Aktienoptionen als Kosten bilanzieren”, Handelsblatt, 8./9 November 2002, No 216, p 16.
  • International Accounting Standards Board (IASB), Exposure Draft 2: Share-based Payment, 2002; see L Knorr/M Zeimes, “Aktienoptionen sind als Aufwand zu erfassen”, Frankfurter Allgemeine Zeitung (FAZ) No 274, 25 November 2002, p 23; K Crook, “Accounting for Share-based Remuneration”, in Syracuse Conference papers, see supra n 9.
  • Cf eg C Weir/D Laing/PJ McKnight, An Empirical Analysis of the Impact of Corporate Governance Mechanisms on the Performance of UK Firms, Version 2, 10. October 2001, available on SSRN.
  • German Corporate Governance Code 5.4.1, 5.4.2.
  • German Corporate Governance Code 5.3.2.
  • See also High Level Group Report II ch III.4.1 (p 59 et seq).
  • Over the past ten years the standard as become somewhat more objective and there are now reform plans to change to an objective standard.
  • See the figures for Germany in KJ Hopt, Großkommentar Aktiengesetz (Berlin/New York, de Gruyter, 4th edn 1999), § 93 comment 16 et seq, and in more detail in H Ihlas, Organhaftung und Haftpflichtversicherung (Berlin, Duncker & Humblot, 1997).
  • German Corporate Governance Code 5.4.1.
  • Combined Code, para A.1.3; P Davies, International and Comparative Corporate Law Journal 2 (2000) 423 at 440 et seq.
  • Combined Code, para A.3.2; P Davies, supra n 77. Compare also the Sec 301 of the Sarbanes-Oxley Act with the new s 10A(m)(3) of the Securities Exchange Act of 1934 defining independence for each member of the audit committee: “may not … (i) accept any consulting, advisory, or other compensatory fee from the issuer; or (ii) be an affiliated person of the issuer or any subsidiary thereof.”
  • See the heated discussion in Germany on the Sarbarnes-Oxley Act's independence requirements, which might be irreconcilable with German labour co-determination; for example, Nöcker, “Amerikanische Herrschaft über die Bilanzen”, Frankfurter Allgemeine Zeitung (FAZ) No 191, 19 August 2002, p 11; Institut der Wirtschaftsprüfer/Wirtschaftsprüferkammer, “Stellungnahme 17 September 2002 (Sarbanes-Oxley-Act)”, Fachnachrichten des Instituts der Wirtschaftsprüfer (IDW-FN) 2002, 593 at 594. The German ex-Minister of Justice even protested that the American act is applied extraterritorially. This has been rightly refuted, see, eg H Merkt, “US-Bilanzregeln, Kein Platz für Schaukämpfe”, Handelsblatt 6./7 September 2002, No 172, p 10. See in more detail G Lanfermann/S Maul, “Auswirkungen des Sarbanes-Oxley Acts in Deutschland”, Der Betrieb (DB) 2002, 1725.
  • P Ulmer, ZHR 166 (2002) 271, see supra B 2; but see also P Davies, Introduction to Company Law, supra n 26, 274.
  • The European Commission plans to strengthen the role of independent non-executive and supervisory directors through a recommendation. See European Commission, Action Plan, supra n 9, Annex 1: Short Term (2003–2005).
  • D Hansemann, Die Eisenbahnen und deren Aktionäre in ihrem Verhältniß zum Staat (Leipzig, Halle, Vollckmar, 1837), § 109 at p 104. See Hopt in Coing/Wilhelm, supra n 1, p 128 at p 154 et seq: Control by the public and the market.
  • The European Commission plans enhanced corporate governance disclosure requirements and increased disclosure of group structure and relations, both financial and non-financial, through directives amending existing legislation. See European Commission, Action Plan, supra n 9, Annex 1: Short Term (2003–2005).
  • RM Buxbaum/KJ Hopt, Legal Harmonization and the Business Enterprise (Berlin, New York, de Gruyter, 1988), 241 et seq.
  • MB Fox, “Required Disclosure and Corporate Governance”, in Hopt/Kanda et al., Comparative Corporate Governance, supra n 36, p 701; idem, “Required Disclosure and Corporate Governance” (1999) 62 Law and Contemporary Problems 113; see also KJ Hopt, “Disclosure Rules as Primary Tool for Fostering Party Autonomy—Observations from a Functional and Comparative Legal Perspective”, in S Grundmann/W Kerber/S Weatherill (eds), Party Autonomy and the Role of Information in the Internal Market (Berlin, New York, de Gruyter, 2001), 246 at p 260; see more generally the comparative and interdisciplinary study by H Fleischer, Informationsasymmetrie im Vertragsrecht (Munich, Beck, 2001).
  • See supra B 1.
  • See supra B 4.
  • High Level Group Report I p 25 et seq, see also SWX-Directive on Information Relating to Corporate Governance, reprinted in Swiss Business Federation (ed), Swiss Code of Best Practice for Corporate Governance (Zurich, Economiesuisse, July 2002), 18 et seq and K Hofstetter, Corporate Governance in Switzerland, Final Report of the Panel of Experts on Corporate Governance (Zurich, Economiesuisse, 2002), 29 et seq.
  • High Level Group Report II ch III.2. (p 45 et seq). The key items to be included in the annual corporate governance statement are listed ibidem at p 46 et seq.
  • The European Commission plans confirmation of collective responsibility of board members for key non-financial statements through a directive amending existing legislation. See European Commission, Action Plan, supra n 9, Annex 1: Short Term (2003–2005).
  • The European Commission plans increased disclosure of group structure and relations, both financial and non-financial, through a directive amending existing legislation. See European Commission, Action Plan, supra n 9, Annex 1: Short Term (2003–2005).
  • Directive of 29 June 1995, OJEC L 168/7, 18.7.1995.
  • Preamble 58 of the consolidated bank supervision directive of 20 March 2000, OJEC L 126/1, 26.5.2000.
  • Forum Europaeum Corporate Group Law, supra n 16, EBOR I (2000) 165 at 207 et seq.
  • J Gernoth/M Meinema, “Niederländisches Enqueterecht: Vorbild für das deutsche Sonderprüfungsrecht?”, Recht der interrnationalen Wirtschaft (RIW) 2000, 844.
  • Forum Europaeum Group Law, supra n 16, EBOR I (2000) 165 at 216 et seq; see already KJ Hopt, “Europäisches Konzernrecht—Thesen und Vorschläge”, Festschrift für R. Volhard (Baden-Baden, Nomos, 1996), 74 at p 83.
  • Gower/Davies, supra n 1, p 701. See High Level Group Report II ch III.3.4. (p 57 et seq).
  • The European Commission plans to enhance the responsibilities of board members by a specal investigation right through a directive or a directive amending existing legislation. See European Commission, Action Plan, supra n 9, Annex 1: Medium Term (2006–2008).
  • KJ Hopt in Festschrift für Mestmäcker, supra n 49, at 919 et seq.
  • Forum Europaeum Corporate Group Law, supra n 16, EBOR I (2000) 165 at 246.
  • High Level Group Report II ch III.4.4. (p 68 et seq), ch IV.4. (p 86).
  • The European Commission plans to enhance the responsibilities of board members by a wrongful trading rule through a directive or a directive amending existing legislation. See European Commission, Action Plan, supra n 9, Annex 1: Medium Term (2006–2008).
  • See the reasons and citations given ibidem. On the other side, a European framework rule allowing the implementation of a group's policy might be helpful; see High Level Group Report II ch V.3. (p 96 et seq). The European Commission agrees and plans a framework rule for groups, allowing the adoption at subsidiary level of a coordinated group policy. See European Commission, Action Plan, supra n 9, Annex 1: Medium Term (2006–2008).
  • See the Hamburg Max Planck Institute study commissioned by the German Ministry of Justice, J Basedow/KJ Hopt/H Kötz/D Baetge (eds), Die Bündelung gleichgerichteter Interessen im Prozess—Verbandsklage und Gruppenklage (Tübingen, Mohr Siebeck, 1998); see also the comments by H Koch, Zeitschrift für Zivilprozeßrecht (ZZP) 114 (2001) 235 and A Stadler, Rabels Zeitschrift für ausländisches und internationales Privatrecht (RabelsZ) 66 (2002) 171.
  • The European Commission plans to enhance the responsibilities of board members by a rule on directors’ disqualification through a directive or a directive amending existing legislation. See European Commission, Action Plan, supra n 9, Annex 1: Medium Term (2006–2008).
  • See KJ Hopt/D Baetge, “Rechtsvergleichung und Reform des deutschen Rechts—Verbandsklage und Gruppenklage”, in Hamburg Max Planck Institute Study, supra n 103, 11 at 47 et seq.
  • Because of the constitutional problems, further review by the European Commission is needed; see High Level Group Report II ch III 4.5 (p 69 et seq).
  • H Fleischer, Gutachten F zum 64. Deutschen Juristentag, Berlin 2002 (Munich, Beck, 2002), F 115 et seq.
  • J Baetge/C Heidemann, “Acht Forderungen an die Wirtschaftsprüfung”, Frankfurter Allgemeine Zeitung (FAZ) 15 July 2002 No 161 p 20. See also US v Arthur Young & Co, 465 US 805 at 817–19 (1984): auditors as “public watchdogs”.
  • Sarbanes-Oxley Act sec 103, 201 et seq.
  • S Kalss, “Die Haftung des Abschlußprüfers gegenüber Gläubigern, Gesellschaftern und Anlegern”, Österreichisches Bankarchiv (ÖBA) 2002, 187.
  • Fleischer, supra n 107, F 66. See infra D 1.
  • As to auditing practices and the tasks of the audit committee, see High Level Group Report II ch III.5. (p 70 et seq).
  • German Corporate Governance Code 5.3.2.
  • Cf. also B Arruñada/C Paz-Ares, Mandatory Rotation of Company Auditors: A Critical Examination, 17 International Review of Law and Economics 31 (1997).
  • Apart from the particular French system of the “double commissariat”, ie of having a full doublecheck by two auditors. This is a rather far-reaching and costly system. But the French stick to it; see Rapport Bouton, Pour un meilleur gouvernement des entreprises cotées (Paris, Septembre 2002), p 18.
  • See KJ Hopt, “Common Principles of Corporate Governance in Europe?”, in JA McCahery/P Moerland/T Raaijmakers/L Renneboog (eds), Corporate Governance Regimes, Convergence and Diversity (Oxford, OUP, 2002), 175 at 183 et seq. See also D Esty/D Gerardin (eds), Regulatory Competition and Economic Integration—Comparative Perspectives (Oxford, OUP, 2001).
  • Supra C 1.
  • See infra D 2.
  • Draft Stock Exchange Prospectus Directive of 9 August 2002, OJEC COM(2002) 460 fin.
  • Supra C 1.
  • Fleischer, supra n 108, F 41 et seq with further references.
  • Stock Exchange Prospectus Directive of 17 March 1980, OJEC L 100/1, 17.4.1980.
  • Sales Prospectus Directive of 17 April 1989, OJEC L 124/8, 5.5.1989.
  • Insider Dealing Directive of 13 November 1989, OJEC L 334/30, 18.11.1989.
  • See Financial Services and Markets Act 2000, 2000 ch c 8, Sec 90 (1), (2), Schedule 10: statements believed to be true.
  • KJ Hopt/H-C Voigt (eds), Prospekthaftung, Ein rechtsvergleichendes Gutachten des Hamburger Max-Planck-Instituts für das Bundesfinanzministerium (Hamburg, November 2002).
  • H-D Assmann, “Entwicklungslinien und Entwicklungsperspektiven der Prospekthaftung”, in H-D Assmann et al (eds), Wirtschafts- und Medienrecht in der offenen Demokratie, Freundesgabe für F. Kübler (Heidelberg, CF Müller, 1997), 317; KJ Hopt, “Kapitalmarktrecht (mit Prospekthaftung) in der Rechtsprechung des Bundesgerichtshofes”, in A Heldrich/KJ Hopt (eds), 50 Jahre Bundesgerichtshof, Festgabe aus der Wissenschaft, vol II (Munich, Beck, 2000), 497.
  • S Grundmann/B Selbherr, “Börsenprospekthaftung in der Reform”, Zeitschrift für Wirtschafts- und Bankrecht (WM) 1996, 985; Fleischer, supra n 108, F 75.
  • Draft Stock Exchange Prospectus Directive of 9 August 2002, OJEC COM(2002) 460 fin.
  • H Merkt, Gutachten F zum 64. Deutschen Juristentag Berlin 2002 (Munich, Beck, 2002), G 41 et seq; G Ferrarini, “The European Regulation of Stock Exchanges: New Perspectives”, 36 Common Market Law Review 569 (1999); idem, “Securities regulation and the rise of pan-European securities markets: An overview”, in G Ferrarini/KJ Hopt/E Wymeersch (eds), Capital Markets in the Age of the Euro (The Hague et al, Kluwer Law International, 2002), 241.
  • See KJ Hopt/B Rudolph/H Baum (eds), Börsenreform—Eine ökonomische, rechtsvergleichende und rechtspolitische Untersuchung (Stuttgart, Schäffer Poeschel, 1997), 222 et seq, 361 et seq, 375 et seq; Merkt, supra n 131, G 58, 114.
  • See supra C 3.
  • RH Kraakman, “Gatekeepers: The Anatomy of a Third-Party Enforcement Strategy”, 2 Journal of Law, Economics, and Organization 53 (1986); S Grundmann/W. Kerber, “Information Intermediaries and Party Autonomy—The Example of Securities and Insurance Markets”, in S Grundmann et al, Party Autonomy and the Role of Information in the Internal Market, supra n 85, 264; Fleischer, supra n 108, F 34 et seq.
  • As to market defects of gatekeeping (certifiers) and the need to rethink legal intervention, see S Choi, “Market Lessons for Gatekeepers”, 92 Northwestern University Law Review 916 (1998).
  • Supra C 1, D 1.
  • Fleischer, supra n 108, F 62, 81 for primary markets, F 101 for secondary markets.
  • Idem F 81.
  • H Fleischer, “Directors’ Dealings”, Zeitschrift für Wirtschaftsrecht (ZIP) 2002, 1217.
  • Investment Services Directive, Annex C: Non-core services; see the critique by Grundmann/Kerber, supra n 134, p 307 et seq.
  • See DH Bliesener, Aufsichtsrechtliche Verhaltenspflichten beim Wertpapierhandel (Berlin, New York, de Gruyter, 1998).
  • See BS Black, “The Legal and Institutional Preconditions for Strong Securities Markets”, 48 UCLA L.Rev. 781 (2001) at 798, 812; idem, “The Core Institutions that Support Strong Securities Markets”, 55 Business Lawyer 1565 (2000) at 1579, 1590; Fleischer, supra n 108, F 131.
  • Draft Market Abuse Directive, Presidency Compromise text of 29 April 2002.
  • S Kalss, “Die rechtliche Grundlage kapitalmarktbezogener Haftungsansprüche”, Österreichisches Bankarchiv (ÖBA) 2001, 641 at 655; Fleischer, supra n 108, F 131 et seq.
  • F Kübler, “Rechtsfragen des Rating”, in W Hadding/KJ Hopt/H Schimansky (eds), Bankrechtstag 1996 (Berlin, New York, de Gruyter, 1997), 115; AC Peters, Die Haftung und die Regulierung von Rating-Agenturen (Baden-Baden, Nomos, 2001); Fleischer, supra n 108, F 132 et seq.
  • J Franks/C Mayer, “Hostile takeovers and the correction of managerial failure”, Journal of Financial Economics 40 (1996) 163; J Franks/C Mayer/L Renneboog, “Who Disciplines Managment in Poorly Performing Companies?” Journal of Financial Intermediation 10 (2001) 209.
  • RA Brealey/SC Myers, Principles of Corporate Finance (Boston et al, 6th edn 2000), 1015 et seq.
  • P Davies, Introduction to Company Law (Oxford, OUP, 2002), 212.
  • High Level Group I p 2.
  • See KJ Hopt, Takeover regulation in Europe—the battle for the 13th directive on takeovers” (2002) 15 Australian Journal of Corporate Law 1; B Dauner-Lieb/M Lamandini, “Der neue Kommissionsvorschlag einer Übernahmerichtlinie und das Europäische Parlament”, Der Konzern 3/2003, 168; K-H Lehne/AM Haak, “Das Ringen um die Übernahmerichtlinie aus der Sicht des Europäischen Parlaments”, Der Konzern 3/2003, 163.
  • High Level Group I p 9.
  • R Skog, Does Sweden Need a Mandatory Bid Rule? A Critical Analysis (Stockholm, Juristförlaget, 1995); E Wymeersch, “The Mandatory Bid: A Critical View”, in KJ Hopt/E Wymeersch (eds), European Takeovers—Law and Practice (London, Butterworths, 1992), 351 at p 356 et seq; P Davies, “The Notion of Equality in European Takeover Regulation”, in J Payne (ed), Takeovers in English and German Law (Oxford, Hart Publishing, 2002), 9 at 20 et seq.
  • Minority protection has been treated from a comparative law perspective at the Congress of the International Academy of Comparative Law in Brisbane 2002; see the general report by E Perakis, Brussels (Bruylant, forthcoming).
  • P Davies/KJ Hopt, “Control Transactions”, in R Kraakman/P Davies/H Hansmann/G Hertig/KJ Hopt/H Kanda/EB Rock (eds), The Anatomy of Corporate Law, A Comparative and Functional Approach (Oxford, OUP, 2004), ch 7: Control transactions.
  • Ibidem.
  • Skog, supra n 152.
  • European Court of Justice, Judgments of 4 June 2002, Case C–367/98, C–483/99 and C–503/99, Commission of the European Community v Portugal/Commission v French Republic/Commission v Belgium; see Europäische Zeitschrift für Wirtschaftsrecht (EuZW) 2002, 429, 433, 437. In the meantime the Court reaffirmed its position in two more decisions, Judgment of 13 May 2003, Cases C–98/01 and C–463/00, Commission v UK/Commission v Spain, see infra n 162.
  • Advocate General Colomer, opinion of 3 July 2001, cases C–367/98, C–483/99 and C–503/99, number 1; annotations by S Grundmann/F Möslein, “Die Golden Shares Grundsatzentscheidungen des Europäischen Gerichtshofes”, Zeitschrift für Bank- und Kapitalmarktrecht (BKR) 2002, 758; W Ebke/M Traub, “EWS-Kommentar”, Europäisches Wirtschafts- und Steuerrecht (EWS) 2002, 335.
  • European Court of Justice, Press release of 4 June 2002.
  • High Level Group I p 34.
  • Proposal for a directive of the European Parliament and the Council on takeover bids, Brussels, 2 October 2002, COM(2002) 534 final.
  • On 13 May 2003 the Court has decided against the UK and against Spain, see supra n 157, and once more has not followed the opinion of Advocate General D Ruiz-Jarabo Colomer of 6 February 2003. Both, the One Pound Special Share in BAA plc (British Airports Authority) held by the UK Secretary of State for Transport and the Spanish special regime for five privatised state enterprises in the tobacco, commercial banking, petroleum, telecommunications and electricity sectors, were held to be incompatible with Art 56 EC. See supra n 157.
  • German Official Gazette part I 1960 p 585 and part I 1970 p 1149.
  • German Stock Corporation Reform Act (KonTraG), Motives to the Draft, BT-Drucksache 13/9712, p 20.
  • See also W Bayer, “Zulässige und unzulässige Einschränkungen der europäischen Grundfreiheiten im Gesellschaftsrecht”, Betriebs-Berater (BB) 2002, 2289 at 2291; R Ruge, “Goldene Aktien und EGRecht”, Europäische Zeitschrift für Wirtschaftsrecht (EuZW) 2002, 421 at 424; H Krause, “Von ‘goldenen Aktien,’ dem VW-Gesetz und der Übernahmerichtlinie”, Neue Juristische Wochenschrift (NJW) 2002, 2747; S Grundman/F Möslein “Die Goldene Aktie—Staatskontrollrechte in Europarecht und wirtschaftspolitischer Berwertung”, Zeitschrift für Unternehmens—und Gellschaftsrecht (ZGR)(2003) 317.
  • See already KJ Hopt, “Europäisches und deutsches Übernahmerecht”, Zeitschrift für das gesamte Handelsrecht und Wirtschaftsrecht (ZHR) 161 (1997) 368 at 415 et seq.
  • These theses were presented to the Tilburg lecture audience on 6 September 2002. They have not been changed.

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