ECGI - AGM 2003

ECGI Interim Report 2003

July 2003

INTRODUCTION

The ECGI is now well into its second year of existence. Once more, it is an appropriate moment to look back on what we have achieved in the last eighteen months and at the same time to take stock of what the future holds.

When we launched the ECGI in January 2002, we believed we had chosen an opportune moment. Issues concerned with the governance of public companies were hitting the headlines across the world but especially in the United States. Since then, the furore over these much publicised problems has shown no sign of abating. Neither, on a separate note, does the unending saga of the European Commission’s Takeover Directive which will have such significant ramifications. The 13th Directive has been one of the ECGI’s key topics for discussion and debate (see below). It has figured prominently not only on our website but also in many of the meetings and conferences that the Institute has either organised or participated in.

The Action Plan on Company Law and Corporate Governance that has just been launched by the European Commission and important decisions from the European Court need to be studied and the ensuing consultations need to be informed by a European body of facts from an independent and authoritative source. In the coming months, we will start a new effort in this direction by devoting our attention to the controversial issue of executive remuneration. We trust that by providing our members and the wider public with a comprehensive set reference pages on a topical issue, the ECGI will continue to fulfil one of its overall ambitions, namely making a constructive and formative contribution to the debate on the formulation of policy and development of best corporate governance practice.

OUR FIRST ANNUAL GENERAL ASSEMBLY

We were very encouraged by the number of members who attended the ECGI’s first General Assembly which was held at Fortis Group’s magnificent offices in Brussels in January. For those of our members who were unable to attend, a full report of the formal part of that meeting was placed on our website very soon afterwards. Colin Mayer very nobly stepped in to chair the meeting at the last minute as I wasn’t able to do so myself. The Board was delighted by the enthusiasm and support that it received from those present and the constructive contributions that they made in the exchange of ideas on how the ECGI was functioning.

A panel discussion on the newsworthy theme “The Future of Corporate Governance in Europe Post-Enron” followed. The views of three eminent academics, Professors Julian Franks and Bengt Holmström, both ECGI Fellows, and Professor Guido Ferrarini, an ECGI Board member, were well matched by those of a practitioner, Count Maurice Lippens. He illustrated his ideas about the future by reference to the experience of the Fortis Group, of which he is the Chairman of the Board of Directors. A lively debate ensued, chaired by FT European Editor Brian Groom.

Our decision to combine our General Assembly with an interesting debate was vindicated and we intend to repeat this again next year when our second General Assembly will be held in London. Members will be given further details nearer the time.

A VICE CHAIRMAN OF THE INSTITUTE ELECTED

Professor Guido Ferrarini, Professor of Law at the University of Genova, a Founder member of the ECGI and a Board member since our inception, was unanimously elected by the board to be Vice Chairman of the Institute. This honour reflects not only his distinguished scholarship on legal aspects of corporate governance but also the contribution that he has made towards the establishment of the ECGI.

THE MEMBERSHIP CONTINUES TO GROW

Last year, I reported on the impressive level of support the ECGI was attracting as evidenced by large number of distinguished academics, companies and individuals joining in one of our three categories of membership, academic, institutional or ordinary.

The Institute continues to attract new members in all three categories from both Europe and outside. The pace of membership growth has, as we expected, slowed somewhat in our second year, adding weight to my plea to all of you to encourage your colleagues and business acquaintances to become members. Aside from our desire to achieve a critical mass which will add a force and weight to our academic output, we are also dependent on membership subscriptions to fund our activities. So the more people we can involve in the ECGI, the more we can finance our ambitious agenda.
Many of you will have been approached to renew your membership subscriptions for a second year. I am pleased to report that, despite the market downturn and the fairly adverse economic environment, with a very few exceptions you have all signed on for another year, a testament we hope to your faith in what the ECGI stands for and what it hopes to achieve in the long term.

INVOLVING THE RESEARCH COMMUNITY

The Institute has recently nominated a further seven ECGI Research Associates, adding to the 25 Research Associates appointed last year. See the full list.
Our intention is to promote the research output of our Research Associates and to this end, we have devoted a separate area on our website for their exclusive use. We hope that over time, they will draw on the expertise and support of the ECGI. For our part, we will disseminate their research work through a common portal and where appropriate, bring it to the attention of the press and policy makers. We will organise academic meetings and involve our Research Associates in workshops.

We will help them in applying for grants, either directly or by association and develop other initiatives that will help them and the Institute to raise the profile of scientific research on corporate governance.

As another way of promoting the research activities of ECGI Research Associates, we aim in the near future to publish a Research Associates Resource page in the public part of the ECGI website. ECGI Research Associates should find it beneficial to have an additional means of promoting their current or recent research. Over time, this Resource page should become much visited, benefiting the ECGI through additional traffic through its website.

PUBLIC PLATFORM

        

We are very pleased to have been associated with a recent conference on “A Modern Regulatory Framework for Company and Takeover Law in Europe” discussing the corporate governance and takeover recommendations of the High Level Group of Company Law Experts to the European Commission organised by Professor Guido Ferrarini, Klaus J. Hopt, Eddy Wymeersch and Jaap Winter on in Syracuse, Sicily. A conference summary is posted on our website to be followed by selected papers from the conference.

For the second year running, we were invited by the Federation of European Securities Exchanges (FESE) to organise a session on corporate governance at FESE’s European Financial Markets Convention. This took place in London in mid-June. Introducing the session entitled “The future of Executive Remuneration in Europe”, I stressed the importance of this topic in a time when it made headlines around the world, for mostly the wrong reasons.

Colin Melvin, Director of Corporate Governance, Hermes Investment Management commented on the factors that contributed to best practice by Remuneration Committees. He reminded delegates that institutional investors also had obligations, namely to devote more resources to understanding remuneration issues and analysing remuneration proposals.

Professor Guido Ferrarini, Professor of Law, University of Genova gave a presentation on the provisional paper ‘Executive Remuneration in the EU: Comparative Law and Practice’ which highlights the theory of corporate governance as applied to executive remuneration and examines the rules applicable in Europe for executive remuneration. He gave the audience a glimpse of some statistical research, looking at remuneration reports and similar documents of FTSE Europtop 300 companies. The session closed with a panel discussion, moderated by Sir Geoffrey Owen, Senior Fellow, London School of Economics. Panel members were Professor Paul L. Davies, Cassel Professor of Commercial Law, LSE and Professor Joachim Schwalbach, Professor of International Management, Humboldt University, Berlin.

ENCOURAGING DEBATE AND DISCUSSION

With the help of Mikael Olsson at SITE (The Stockholm Institute of Transition Economics), we have published a comprehensive reference section on our website devoted to Takeover Directive. This is extensively used by researchers and others to access official EU documents, academic papers and news reports on this seemingly interminable but important topic.

Earlier this year, a number of our Research Associates were involved by the National Bureau of Economic Research (NBER) and the University of Alberta School of Business in a project that examines the Evolution of Corporate Ownership and Family Firms.

Previous research has shown that there is a great variety in ownership and control arrangements across countries and this diversity has sparked a lively debate. In order to understand the reasons for such differences, the projects goes back in time and looks at the evolution of ownership and control in parallel with the evolution of economic growth, regulatory reform and politics.

In conjunction with this project, we arranged with the Financial Times that they would publish a feature on Corporate Dynasties on FT.com, the FT’s online service. Already, an introductory article and two others focusing on the UK and Italy have appeared here and in the FT newspaper. Over the coming months, we anticipate that further articles in the series covering Japan, India, Canada, China, France, Germany, the United States, the Netherlands and Sweden will appear in the same media.

The session at the FESE Convention (see above) marks the beginning of ECGI’s focus on a new major topic – Executive Remuneration. A reference section with links to academic papers, research, conference presentations and news coverage has recently appeared on our website. It will be further developed by one of our new Research Associates, Niamh Maloney, who is Lecturer in the School of Law at Queens University Belfast.

ECGI WORKING PAPER SERIES IN FINANCE AND LAW

In keeping with our primary role of undertaking and disseminating impartial and objective research on corporate governance, we have established the two Working Paper series I mentioned in my last report to you. At this time, there are some 20 papers available in the Economics Series and 10 in the Law Series. These papers are available online free of charge from the Social Science Research Network (SSRN) website. We hope in due course to make them all also available in hard copy form for purchase by subscription or as individual items. I am convinced that it won’t be long before these two series rival their better known and longer established counterparts from international research organisations.

A EUROPEAN CORPORATE GOVERNANCE TRAINING NETWORK

Last year, you may recall that the ECGI submitted an Expression of Interest with regard to the setting up of a Virtual Centre of Excellence (VCE) under the EU 6th Framework Protocol. We were disappointed that the European Commission decided not to include corporate governance in the first round of calls.

We decided however to submit another proposal this year in the training area. In March, as part of a consortium bid, our proposal for a Research Training Network under the Marie Curie Research Actions was lodged with the Commission's Research Directorate General Human Resources and Mobility. If successful our Institute will make a very significant contribution to the creation of a pan-European doctoral school on corporate governance, training early stage researchers from finance, economics, law, management and political science by drawing on the capabilities and resources of our members from across Europe. We expect to hear in September this year if this proposal has been successful in the Commission's evaluation procedure. If it is, we will then be invited by the Commission to enter into contract negotiations.

OUR WEBSITE

With the ECGI now firmly established in the eyes of the academic and business community, we gave our website a face lift to reflect our growing agenda and our expanding range of new activities. The site now attracts around 15,000 visitors each month although in December last year, this figure exceeded 21,000. Looking over the last year, our website has received nearly 5 million hits and over 600,000 pages have been accessed by some 170,000 visitors. All this traffic has had a further benefit in that it has taken the ECGI higher up the search listings of, for instance, Google, now the world’s leading search engine.

To add to the authority of our web presence, we have extended the section devoted to external links to organisations involved with corporate governance. It is hoped that this area will become an authoritative collection of up-to-date references.

We continue to add to our unique and comprehensive listing of worldwide corporate governance codes. There seems to be no abatement in the appearance of corporate governance reforms both in Europe and elsewhere. We are grateful to members who have notified us when new codes appear in their country and we always publicly acknowledge our sources of information.

DELIVERING BENEFITS TO OU MEMBERS

We constantly strive to find ways to provide benefits to our Members in which we include our Fellows and Research Associates. Aside from a Resource page for Research Associates (see above), we intend to devote a similar Resource page to our Fellows. They and all our members can avail themselves of our website to publicise any books and publications on Corporate Governance that they have authored. A facility exists on our website for anyone to buy these books online from the booksellers, Blackwells.

Where possible, we negotiate with our research partners such as CEPS (Centre for European Policy Studies) for our members to attend seminars at a reduced price and we are working with Oxford University Press (OUP) on a scheme whereby our members can buy any books in their catalogue at a discount.

KEEPING IN TOUCH WITH OUR MEMBERS    

My next full report to members will be delivered at our next General Assembly which will be in London in the early part of 2004.

I am delighted that the Institute is in good form and well set up for an interesting future. I continue to exhort you to help us shape the ECGI's future and to contribute to the much wider goal of improving understanding and the exercise of the highest standards in corporate governance.

Antonio Borges, Vice Chairman, Goldman Sachs International, Chairman ECGI
July 2003

MINUTES OF THE ANNUAL GENERAL ASSEMBLY 
HELD ON 15TH JANUARY 2003 AT THE OFFICES OF FORTIS
20 RUE ROYALE – 1000 BRUSSELS

On 15th January 2003, the first annual General Assembly of the members of ECGI took place with the following agenda :

Presentation and approval of the annual report.
Presentation of the accounts for 2002.
Approval of the accounts for 2002.
Outline of future activities and general discussion.
Approval of budget for 2003.
“ Discharge” of directors.
Board confirmation.
Approval of proposed membership fees for 2003.
Appointment of the auditor for 2003 & approval of auditor’s fee.
Other business (if any).

The meeting started at 17.00. Professor Colin MAYER took the chair in the absence of ECGI Chairman Mr. Antonio BORGES who was unable to attend due to illness. He was assisted by the Executive Director, Mr. Marco BECHT.

The meeting was attended by 54 members present or represented by proxy.

After a welcome statement by the acting Chairman, a summary of the reasons which led to the formation of the Institute, the main developments which had taken place since January 2002, the accounts as per December 31st 2002 and the annual report of the board were submitted to the members.

A summary was given of the main events and activities of the Institute either directly or in association with other organizations.

Members were informed that the Institute could now count among its members an important group of lawyers, economists and eminent professionals and academics who promised their active support as well as some 45 companies or organizations in institutional membership.

After discussion, the various items of the agenda were submitted for the approval of the meeting.

After the board members had declared not to take part to any votes in which there could be a conflict of interest, the following resolution were voted :

1.    ANNUAL REPORT

The annual report of the board, largely represented by the information contained in the Interim Report which is available to members on the ECGI website, was approved unanimously.

2.    ACCOUNTS AS PER 31ST DECEMBER 2002

The accounts as per December 31st 2002 showed a profit of €146.65 on cash basis.

However as a certain number of expenses relating to 2002 will still have to be accounted for in 2003, the net result of the year was a small loss of about € 3.000. This was felt to be quite satisfactory for a start up period.

On a question in respect of the burden of the expenses relating to the events organized by ECGI or in association with ECGI, the executive director answered that basically the various events had taken place with the financial support of outside organizations, or had been self-supporting. This meant that only the direct overhead expenses of the Institute had been covered by ECGI.

The accounts were thereupon approved unanimously.

3.    FUTURE ACTIVITIES

An outline of the future activities of ECGI was given by the executive director. It was the intention of the board to develop high quality research activities and to bring people together in order to cooperate within various communities concerned with Corporate Governance issues. (Click here to see a copy of the presentation by Marco Becht, ECGI Executive Director)

It was the intention to go on involving actively academics, lawyers, businessmen and economists and to broaden the audience as far as possible.

The objective of the board was that the membership fees should cover the current administrative and running expenses and that future events, which would be organized by or with the co-operation of ECGI, would become self-supporting.

The ECGI’s aim was to increase the number of institutional members to between 100 and 150, in order to guarantee the survival of the Institute.

4.    BUDGET 2003

The budget for 2003 was presented to the members.

It was also stated that at the close of the financial year, there were a certain number of expenses relating to the starting of activities which would not recur.

After discussion, the budget was approved unanimously.

5.    DISCHARGE OF THE DIRECTORS

A general discharge was granted to the directors regarding the execution of their functions during the financial year that had just closed.

6.    BOARD CONFIRMATION

At the formation of the Institute, a board of 11 directors was formed, of which 5 were non-academics and 6 academics.

Their functions ended at the present meeting but all directors were eligible for reelection.

The meeting unanimously decided to reelect as directors :

Mr. Paul ARLMAN,
Mr. Antonio BORGES, 
Mr. Leo GOLDSCHMIDT, 
Mr. Oscar FANJUL, 
Mr. François HENROT, 
Mr. Marco BECHT, 
Mr. Mathias DEWATRIPONT, 
Mr. Guido FARRARINI, 
Mr. Bengt HOLMSTRÖM, 
Mr. Colin MAYER,
Mr. Richard PORTES.

Their functions will end at the annual members’ meeting of the year 2004. (The draft said 2005 but surely it meant 2004)

In the future, it was decided that a committee would be established to nominate board candidates.

7.    MEMBERSHIP FEES

It was decided to maintain the membership fees at the 2002 level: €2,000 per year for institutional members and €100 per year for individual ordinary and academic members.

8.    STATUTORY AUDITOR

Although the Institute is not legally subject to audit, the bylaws provided for the nomination of a statutory auditor, which must be a “Reviseur d’Entreprises” (Belgian Chartered Auditor).

After deliberation, the meeting approved the election as statutory auditor of Mr. Vincent MISSELYN, Reviseur d’Entreprises, rue des Saules 48 à 1380 Ohain.

These functions were conferred for one year, subject to reelection. The annual fee was fixed at €1,500 exclusive VAT.

The agenda being herewith ended, the formal part of the meeting was closed at 18.05 p.m.