Corporate Boards, Incentive Pay and Shareholder Activism in Europe: Main Issues and Policy Perspectives

This is the first chapter in a volume on “Boards and Shareholders in European Listed Companies: Facts, Context and Post-Crisis Reforms” (M. Belcredi and G. Ferrarini eds., Cambridge University Press forthcoming 2013). We offer an overview of the volume, placing the same in the context of recent EU reforms and of corporate governance theory, and summarizing the main outcomes of the various chapters. In addition, we offer some policy perspectives based on the theoretical and empirical outcomes of the research project of which this volume is the product. We analyse four main topics in the corporate governance of European listed firms: board structure/composition and its interaction with ownership structure, board remuneration, shareholder activism and corporate governance disclosure based on the “comply-or-explain” approach. For each of them, this volume provides new evidence and derives specific implications, relevant for the policy debate. Basically, proposals aimed at increasing disclosure and accountability at the European level look generally well-grounded: this is true, in particular, for disclosure about managerial compensation and compliance with national governance codes based on the “comply-or-explain” principle. On the opposite, we suggest caution when evaluating proposals targeting specific governance arrangements, which may actually lead to unintended consequences. Even though the Commission has – so far – refrained from adopting an excessively intrusive stance, further analysis may be needed before intervening in the fields of board composition and shareholder activism.