Carolyn Dittmeier Trends in EU Corporate Governance: The Search for Stability

1. Carolyn Dittmeier Trends in EU Corporate Governance: The Search for Stability

2. Trends in EU corporate governance Is the stakeholder community satisfied with Corporate governance perfomance NO

3. The European Commission and Parliament debates From shareholders responsibilities to board conduct to internal governance

4. The Issues Company structures Comply or explain versus EU Regulation Proportionality Shareholder responsibilities Short termism External Supervisory role External Audit Board Strategic Risk Management Internal audit

5. The current legislative proposals and debates at the European Commission and Parliament Corporate Governance in Financial Institutions Lessons from the crisis: Audit Policy/Statutory Audit EU Corporate Governance Framework / Company Law

6. Company Structures Is the Two Tier System better than the Board / Audit Committee structure

7. EU Regulation versus Comply or Explain of National codes EU Corporate Governance Green Paper Over 400 responses Please NO Regulation!

8. Comply or Explain Comply AND Explain

9. National CG Codes Need for convergence

10. 90% of Corporate Governance Codesrequire or recommend Internal Audit, butfewproviderequisitestoensureitseffectiveness Corporate Governance Codes and Internal audit Required Recommended Germany Austria Finland Luxemburg Belgium Hungary France Malta Bulgaria Romania United Kingdom Ireland Greece Slovakia Cyprus Italy Netherlands Slovenia Czech Republic Latvia Spain Denmark Estonia Sweden

11. Proportionality: No one size fits all! But how to measure proportionality

12. Notonesizebutfitforall June 6 at the European Parliament: Finding an EU solution to achieve a truly effective corporate governance regime, while allowing entities the flexibility in selecting their own CG structures MEP Evelyn Regner, European Commission Director UgoBassi,, Deputy Director General Assonime (EuropeanIssuers) Carmine Di Noia, ECIIA President Carolyn Dittmeier

13. Increase Shareholder responsibilities • Shareholder approval for more transactions • Mandatory annual elections of board members with criteria • Control on Related party transactions

14. Short Termism – Increase Long term viability • Corporate statutes to reflect overall goal of long term viability • Corporate governance reporting on long term objectives • Abandon Quarterly Reporting?

15. Increase Supervisors/regulators involvement • Enhanced, two-way communication between auditors and supervisors with alert system • Board competency test • Monitor CG Resports • Oversight of conflict of interests • A bigger stick

16. External Audit – Lessons from the Crisis • Independence, independence and independence • Rules for independence and quality under supervisory body • Audit Committee responsible • Almost eliminate non-audit services • Audit firms to publish accounts, methods, fees Impact assessment

17. External Audit – Lessons from the Crisis • External audit role is integral to corporate governance • Include risk reports of the entity / check on excessive risk • Social responsibility role • Right to be heard at general meetings • Duty to report to Supervisor

18. ECIIA’s Clarificationto key EuropeanParliamentMember

19. The issues Company structures Comply or explain versus EU Regulation Proportionality Shareholder responsibilities Short termism External Supervisory role External Audit Board Strategic Risk Management Internal audit

20. Stronger Board of Directors crucial: Composition, Competencies, Compensation • Fit and proper test by legislation -regular external evaluation • Separate role of the CEO and Chairman • Strict remuneration policy based on long-term performance • Diversity • Strategic Risk Management

21. Directive 2006/43/EC86-Article 41 • “the Directive’s most frequently non-transposed article”

22. Strategic Risk Management • Annual report on risk, risk management systems and the adequacy of internal control • Annual Board approval of risk model assessment • Establish Risk Committee or Risk function • Adopt /describe framework

23. ECIIA Guidance ECIIA & Ferma joint papers: ReinforcingBoard And Senior Management competencies on risk management, internal control and internal audit Part II Senior Management Focus December 2011 Part I Board Focus 2010

24. Internal Audit The time is right for Assurance

25. Explicit potential Impacts on internal audit? • “The two facets of auditing – internal and external – to be clearly circumscribed in law” (Financial sector) • “Efficient, regular dialogue” • IA to inform External Auditor who reports to Supervisory authority? • Risk model assessment • CSR and CG hand in hand

26. Implicit potential Impacts on internal audit? Independence Quality Assurance Assurance methodology Advisory role

27. ECIIA Guidance • Corporate Governance Insights • Issued May 2012 • Reinforcing Audit Committee oversight regarding global assurance • A single defined governance framework for global risk management and assurance • The Three lines of Defence model for global assurance • Ensuring adequacy of Internal audit • Ensuring proper distinction between internal audit assurance and statutory/ external audit

28. ECIIA in open discussionwith EU associations on EU regulatoryconsultations European Commission Business Europe

29. Three Lines of Defense The IIA AdvocacyPlatform

30. The ECIIA working hard for the profession • Promoting good corporate governance and appropriate recognition of Internal Audit in the European regulatory enviornment • Marie_HélèneLaimay, • Vice President • Carolyn Dittmeier, • President • Martin Stevens, • Treasurer • Kristina Bernotaitė • Juan Ignacio Ruiz Zorrilla • Philip Ratcliffe • Hans Joachim • Büsselberg Pascale Vandenbussche SecretaryGeneral • Thijs Smit

31. The Corporate Governance Citizen Program Through Citizens comes Progress Generali Assicurazioni

32. ThankyouEnjoy the Conference