I am delighted
to be with you this evening at the launch of the
Transatlantic Corporate Governance Dialogue. This
excellent initiative has the advantage of gathering
in one and the same room leading academics from
law, economics and finance; regulators; law makers;
corporate leaders; investors and other corporate
constituencies from both sides of the Atlantic.
I should like to congratulate ECGI (The European
Corporate Governance Institute) and ALI (the American
Law Institute) for their imaginative approach, which
has the Commission’s full support.
Corporate Governance is
high on political agendas on both sides of the Atlantic.
This reflects not only painful and costly past experiences
but a growing awareness that a sound corporate governance
framework is a key condition for liquid capital
markets which function well. For economic confidence.
For convincing investors to invest. Hence for the
whole economy. And in the end, that is the most
important consideration. Strengthening our economies
through strong capital markets.
Until recently, however,
there was a tendency for both sides to look at these
issues in splendid isolation from each other, at
best regarding what was going on in the other as
of mild interest, at worst ignoring it. The rationale
for the Dialogue that we have had today is a realisation
that this is not good enough, and that we have to
engage with each other.
Because our economies are
strongly interdependent. The EU and the US are the
world’s largest markets, leading players in
the WTO and each others principal source of foreign
direct investment. The transatlantic economy employs
over 12 million workers. And let us recall that
capital markets, defined here as bonds, equities
and bank assets amount to 50 trillion dollars in
both the EU and the US: equivalent to around 6 times
GDP for both of us. We are also responsible for
60% of world trade in commercial services. Whatever
we do on one side of the Atlantic will inevitably
impact on the other. We cannot avoid this regulatory
spillover. Sarbanes-Oxley was not an exception:
it is the ‘rule’. What we do in the
EU affects the US and vice versa. And these interdependencies
are increasing. Therefore, transatlantic cooperation
on corporate governance is not only mutually beneficial.
It is an economic, political and regulatory necessity.
What are the elements required
for effective cooperation and work sharing? There
is no mystery here: they are exactly the same elements
required in the rest of our financial relationship.
There are four of them.
(1) Mutual understanding
We need to understand each
other, to understand each other’s approaches,
systems and legislation. We need to respect our
different ways of doing things. Our different cultures.
In some cases, mutual understanding can lead to
an appreciation of where one system or the other
has developed a more sophisticated approach and
promote the best regulatory practice.
(2) Information flow and
Mutual understanding of
existing rules is not sufficient per se. We must
also consult upstream on the development of new
rules or regulatory approaches and to ensure information
flow and transparency. This is crucial for market
and consumer ‘buy in’ to the process
and results. Crucial for confidence building. I
would recall that on the Sarbanes-Oxley Act, there
was no consultation whatsoever with third countries
which resulted in difficulties which it has taken
a good deal of time and effort to resolve.
Convergence of approach
is a key element to combine with mutual understanding
and information flow. We need to make sure that,
on both sides of the Atlantic, we are aiming at
the same basic goals. Wherever possible, we should
aim to converge our thinking. On corporate governance
for instance, shareholders want to be clear that
in Europe and America, we have the same underlying
principles of effective management of boards.
This will, of course, not
always be possible. But we should certainly do this
whenever we can.
Convergence is a good solution,
but it is not practicable in all areas. In some
cases, what is important is not to take identical
approaches, but to agree on the equivalence of our
approaches which basically share the same goal.
Our boards do not necessarily have to be set up
exactly the same way for them to guarantee effective
Working on the basis of
equivalence is not an admission of defeat: it is
a healthy recognition by both sides that there can
be more than one way to skin a cat.
In practice, the determination
of equivalence is not easy. We need a full toolkit
of techniques and process options. One size will
not fit all problems.
The Transatlantic Corporate
Governance Dialogue is aimed precisely at contributing
to this approach. It will complement the other Dialogues
that we have with the United States – notably
the Financial Markets Regulatory Dialogue.
was devoted to the examination of the experience
of the EU and the US and the potential implications
for respectively the US and the EU.
The flow of information,
through the outstanding speeches delivered and the
very lively debates which followed, has already
This first successful day
of the Transatlantic Corporate Governance Dialogue
will pave the way for further enriching conferences.
A similar conference will be held next year in the
United States. Another conference may be held in
Japan in 2006.
Kennedy said in his inaugural
address ‘all this will not be finished in
the first one hundred days, nor in the life of this
administration, nor even perhaps in our lifetime
on this planet. But let us begin’.
So with all my best
wishes of success for the work as it continues,
bon appétit !