Companies Bill together with a range of measures being driven by Irish EU Presidency aim to balance responsible governance with the need to avoid unnecessary burdens
Government must ensure that the right regulatory balance is struck if opportunities for economic growth and job creation are to be maximised, according to Minister for Jobs, Enterprise and Innovation Richard Bruton TD.
One of the lessons of recent years, if it was not already clear, is that good corporate governance is a key factor in companies’ performance and not merely a desirable add-on, the Minister added.
Minister Bruton was speaking on the opening day of a major two-day international conference on European Corporate Governance and Company Law, facilitated by the Department of Jobs, Enterprise and Innovation as part of the Irish Presidency of the EU. The conference is being attended by a wide range of the leading public and private sector officials responsible for corporate governance within the EU, and is being addressed by the European Commissioner for Internal Markets and Services Michel Barnier and Commissioner Daniel M. Gallagher, Commissioner of the US Securities and Exchange Commission.
Minister Bruton said: "One of the lessons of the last few years, if it was not already clear to everyone, is that good corporate governance is a key factor in the long-term performance of companies and not merely a desirable add-on. I am absolutely convinced that a robust governance system is integral to a sustainable and entrepreneurial business environment. That is why, for example, through the Companies Bill we are stripping out unnecessary regulatory requirements but also codifying and clarifying obligations so as to improve corporate governance.
"It is vital that we learn from past regulatory failings, so that at the EU and national levels we have a corporate governance regime that is robust and fit for purpose. This regime must be effective but must also meet the realities of the business world. It is crucial to strike the appropriate balance so we do not stifle innovation, entrepreneurship and job creation.
"At national level we are in the process of making major changes to company law. The Companies Bill currently making its way through the Oireachtas is the largest substantive piece of legislation in the history of the State, and makes major reforms to the way companies operate in this country in the interests of improved corporate governance and reduced regulation. For the vast majority of private companies, a range of regulatory requirements will be eliminated by this Bill, including the obligation to have two directors, the requirement to have a physical AGM and various obligations in respect of the company constitution. Alongside this, a range of improvements will mean clearer and more transparent corporate governance rules, such as a codification of the duties of directors.
"At EU level, given the huge potential of the EU Single Market to boost economic growth and create jobs, the Irish Presidency has prioritised the implementation of the outstanding pieces of Single Market legislation. Effective rules for company law and good corporate governance are essential for the efficient management of this Single Market.
"The Irish Presidency has already achieved some important wins in this area. Building on the progress made by earlier Presidencies, we recently secured agreement on the new Accounting Directive. The Directive is designed to reduce reporting burdens, targeting mainly small companies. Progress has also been made by the Irish Presidency on updating the existing Audit Directive. This work will enhance the audit function, resulting in greater public and investor confidence in the accounts of companies.
"There is also increasing recognition that large shareholders and investors also have a key role to play in helping to improve corporate governance standards. There is an onus on institutional investors and shareholders in particular to demand full explanations from boards if they are not satisfied with the information provided, and to be more vigilant in terms of assessing the risk policies of corporations in which they are investing. Together with adherence to corporate governance codes, shareholder and investor influence can play a crucial role in ensuring an effective corporate governance regime is in operation".
The 12th European Corporate Governance & Company Law Conference takes place at the Convention Centre in Dublin today and tomorrow, 16 and 17 May, and is supported by PwC, Arthur Cox and The Irish Stock Exchange.