Rules relaxed on corporate governance statutory audit directive

Members of the European Parliament have given their backing to relaxing corporate governance rules on a proposal for statutory audit committees. The decision by Parliament follows the Committee on Legal Affairs vote against the proposal in June which would have affected listed companies, banks and insurance companies.

The proposal, which forms part of the modernising of the Eighth Company Law Directive, had been framed in an effort to avoid failures in corporate governance such as that which caused financial scandals in Europe at Parmalat and Ahold.

Industry experts had raised concerns that the proposal was inflexible and would undermine national corporate governance codes such as the UK's "comply or explain" approach. Their view was backed by the Legal Affairs Committee Rapporteur, Bert Doorn, who told Parliament during the debate that "Corporate governance should be negotiated in the Member States and there is no need for a single EU rule."

In the same vein, Mr Doorn had earlier spoken to Chase Cooper saying, "Corporate governance should develop along the lines of principles, rather than detailed rules, in order to do justice to the different corporate governance systems in Europe".

The approved amendments by Parliament mean that Member States can now determine the way in which firms conduct their internal audit reporting and relieve excessive financial and administrative burden.