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Initial coin offerings are a new way for blockchain startups to finance project development by issuing coins or tokens in exchange for fiat money or Bitcoin or other cryptocurrencies. In this article, we start from the current distinction between different types of tokens and argue that it can create confusion and should be at least partially abandoned. We believe that the conceptual difference between a currency token and a tradable utility token is just the dimension of the crypto environment in which the token is spent. More specifically, ‘utility tokens’ combine the customer payment mechanism with the utility component and, when tradable on a secondary market, the investment one. We argue that they blur the traditional distinctions between currencies, financial assets and consumption goods. Moreover, we stress the increasing importance of online crypto exchanges. Recently some exchanges have also taken up the role of trusted intermediaries and staked their reputation on token offerings, which are termed initial exchange offerings and have gained in popularity. We therefore argue that the crypto market increasingly looks like a segment of the capital market and behaves as such. Given that tokens have a clear investment component, we show that they are tradable securities under the Prospectus Regulation. We compare the European securities regulation with its US counterpart and focus on prospectus exemptions, highlighting the great differences between Europe and the US which make Europe less amicable to blockchain startups.

Currently, the Council of the European Union is negotiating the European Commission’s recent proposal on cross-border mobility. This paper provides an overall assessment based on the proposal’s central pillars: freedom of establishment and protection of the interests of creditors, shareholders, and employees. The proposed directive meets a real necessity for regulation on a European level and pursues an ambitious agenda. While the general approach is excellent, there is room for improvement on some issues of importance.

In this paper we argue that, as market mechanisms have worked acceptably well and there has been no investor protection crisis, ICOs and IEOs have so far failed to offer arguments in favour of a mandatory prospectus-like regime. Investors in the blockchain space know where to get information and what they risk. Accordingly, we offer a preliminary market-based critique of MiCA’s white paper regulation, arguing that blockchain startups offering securities or utility tokens should be left free to decide what information to offer to investors, as long as the information provided is free from false or misleading statements, and does not omit any material fact. We also argue, contrarily to the Commission’s proposal, that to facilitate private enforcement the burden of proof in liability actions should be on the issuer and not on the investor. This approach would offer a chance to reduce red tape and return to a more manageable regime, where general provisions against fraud and misrepresentation are applied with well-defined private liability rules and burden of proof allocations. As a result, blockchain startups would not only be left free to signal their quality and develop their channels of communication with potential investors, but concurrently also be effectively responsible for the information provided.

The aim of this book is to collect the views of expert academics and practitioners on the latest regulatory developments in sustainable finance in the EU. The volume deliberately includes a wide range of cutting-edge issues. Although it focuses on the green transition, it also addresses social and governance issues. The individual contributions deploy different methods of analysis, including theoretical contributions on the status quo of macrofinancial research as well as law and economics approaches, encouraging interdisciplinary readership. The book chapters are grouped in a thematic way, covering the following areas: (i) general aspects (Part I); (ii) sustainable finance and corporate governance (Part II); (iii) sustainable finance and systemic risk (Part III); and (iv) sustainable finance and financial markets (Part IV). This chapter provides a summary and overview of the chapters. But before doing so the authors discuss the impact of the COVID-19 crisis on the sustainability agenda.

In this paper, we ask whether benefit corporations have a role to play in the emerging EU sustainable governance framework. In sec. 2, we briefly introduce the benefit corporation with regard to US law and to the laws of some EU member States, such as France and Italy, which have adopted this company form. In sec. 3, we focus on the benefit corporation’s purpose and function from a comparative law perspective, asking whether benefit corporations perform a useful function internationally. We argue that corporate purpose tends to be a flexible concept across countries and that benefit corporations are not the only way to reconcile profit and social values in business corporations. In sec. 4, we compare the critical features of the law relating to benefit corporations with the essential elements of the emerging sustainable governance framework. We show that the latter partially overlaps with the laws on benefit corporations and to some extent is a substitute for them, therefore reducing the potential interest in this corporate form. In sec. 5, we conclude that mainly firms which the new EU sustainable governance framework does not apply to, such as non-listed SMEs, will adopt the benefit corporation model when available in their jurisdiction, while other companies may still adopt it mostly for communicating their commitment to sustainability.

An increasing number of firms make reference to the pursuit of environmental and social goals in the definition of their purpose. This raises important issues with respect to the way in which the trade-offs between profit maximization and social value should be solved. As I show in this chapter, there are different perspectives that can be adopted to this end depending on the field of scholarship selected: economics, finance, management and law. Each perspective offers different nuances as to the way in which corporate purpose is defined and the conflict between the pursuit of profit and social value is dealt with. In Sect. 4.2 of this chapter, I argue that a broader concept of corporate purpose has gradually emerged over the years in economics, finance and management studies, as a result of various approaches to corporations such as corporate social responsibility (CSR) and stakeholder theory, which have been gradually integrated into the corporate governance framework. Environmental and social sustainability has come to characterize most of the instances of CSR and some core aspects of stakeholder governance, without discarding the pursuit of corporate profits as a long-term goal of the corporation. At the start of this century, sustainability concerns have entered into the area of finance studies through the theory of “enlightened shareholder value” (ESV) and its homologues like “shared value”. In Sect. 4.3 I argue, from a comparative law perspective, that corporate purpose has been variously defined in different jurisdictions, while European laws often consider the company’s interest rather than corporate purpose. However, corporate purpose is generally identified in practice with the pursuit of corporate profits, albeit with variations concerning the relevance of given stakeholders and social values in corporate governance. In general, legal definitions of corporate purpose are flexible and allow for different types of solution of the conflict between economic value and social value at firm level and within a given system. In Sect. 4.4 I critically analyse recent economics and management studies which argue that corporate purpose should be modified to reflect the prevalence of social value over shareholder value, and that the latter should be pursued by managers only derivatively, as a result of pro-stakeholders actions directed to increase the “total pie”. I object to this recent trend from a law and finance perspective and show my preference for keeping the relevant discussion within the confines of ESV theory. However, I admit that corporate purpose should be larger than profit from a behavioural perspective if we want to motivate people to perform outstandingly and sustainably in organizations. In Sect. 4.5, I emphasize the mounting role of regulatory and ethical constraints to business conduct deriving from sustainability concerns. These constraints go beyond the mere calculus required by ESV, which asks management to pursue stakeholder interests only to the extent that this increases the long-term value of the firm. Indeed, ethical considerations as reflected by international standards and consolidated best practices should apply to the running of businesses without necessarily requiring a prior analysis of their precise impact on financial performance.

The actions proposed by the Commission’s Action Plan and analysed in this chapter respond to five broad strategies that can be defined as ‘public incentives’, ‘standardisation’, ‘disclosure’, ‘corporate governance’ and ‘financial regulation’. The first strategy consists of fostering investments through financial and technical support for sustainable infrastructure and other projects. In perspective, the European Commission will establish a single investment fund providing support and technical assistance to crowd in private investment. The second strategy includes the establishment of an EU taxonomy of sustainable activities which should help shifting capital flows towards them. It also includes the setting of standards and labels for green financial products, which should enhance the trust in the market of these products and ease investors’ access to them. These two strategies will help establishing well-defined and deep markets in sustainable investments and will work as preconditions to the others. The third strategy covers both corporate disclosure and third party information and assessments. The Non-Financial Disclosure Directive is being reviewed and complemented by other measures, such as an impact assessment of IFRS on sustainability. Sustainability benchmarks have been developed in order to allow investors to track and measure performance and allocate assets accordingly. In addition, credit rating agencies and market research services should integrate sustainability into their assessments. The fourth strategy combines sustainable corporate governance with attenuating short-termism in capital markets, and assumes that boards should develop their own sustainability strategies and act in the company’s long-term interest. Both disclosure and corporate governance are traditional strategies in capital markets regulation and functioning, while their extension to sustainability is a reflection of the new interest of investors and corporate stakeholders for ESG issues in addition to financial performance. The fifth strategy implies at least three types of regulatory reform. First, the Markets in Financial Instruments Directive (MiFID II) and the Insurance Distribution Directive (IDD) should be amended in the sense that investment firms and insurance distributors should consider sustainability issues when offering financial advice. Second, fiduciary duties of asset managers and institutional investors should be clarified so as to include ESG factors in the investment processes. Third, ESG should be incorporated in prudential requirements of financial institutions so that they channel their investments towards a more sustainable economy, while reducing the risks deriving from unsustainable economic development. These five strategies represent a very ambitious design of the European Commission which will require multiple actions at all levels. These actions generally require regulation and/or supervision often at EU level, but private incentives and cultural developments towards an environmentally sustainable economic system will also be important in furthering the success of the Action Plan.

An increasing number of firms make reference to the pursuit of environmental and social goals in the definition of their purpose. This raises important issues with respect to the way in which the trade-offs between profit maximization and social value are solved. As I show in this chapter, there are different perspectives that can be adopted to this end depending on the field of scholarship selected: economics, finance, management and law. Each perspective offers different nuances as to the way in which corporate purpose is defined and the conflict between the pursuit of profit and social value is dealt with. In section II of this chapter, I argue that a broader concept of corporate purpose has gradually emerged over the years in economics, finance and management studies, as a result of various approaches to corporations such as corporate social responsibility (CSR) and stakeholder theory, which have been gradually integrated into the corporate governance framework. Environmental and social sustainability have come to characterize most of the instances of CSR and some core aspects of stakeholder governance, without discarding the pursuit of corporate profits as a long-term goal of the corporation. At the start of this century, sustainability concerns have entered into the area of finance studies through the theory of “enlightened shareholder value” (ESV) and its homologues like “shared value”. In section III I argue, from a comparative law perspective, that corporate purpose has been variously defined in different jurisdictions, while European laws often consider the company’s interest rather than corporate purpose. However, corporate purpose is generally identified in practice with the pursuit of corporate profits, albeit with variations concerning the relevance of given stakeholders and social values in corporate governance. In general, legal definitions of corporate purpose are flexible and allow for different types of solution of the conflict between economic value and social value at firm level and within a given system. In section IV I critically analyse recent economics and management studies which argue that corporate purpose should be modified to reflect the prevalence of social value over shareholder value, and that the latter should be pursued by managers only derivatively, as a result of pro-stakeholders actions directed to increase the “total pie”. I object to this recent trend from a law and finance perspective and show my preference for keeping the relevant discussion within the confines of ESV theory. However, I admit that corporate purpose should be larger than profit from a behavioural perspective if we want to motivate people to perform outstandingly and sustainably in organizations. In section V, I emphasize the mounting role of regulatory and ethical constraints to business conduct deriving from sustainability concerns. These constraints go beyond the mere calculus required by ESV, which asks management to pursue stakeholder interests only to the extent that this increases the long-term value of the firm. Indeed, ethical considerations as reflected by international standards and consolidated best practices should apply to the running of businesses without necessarily requiring a prior analysis of their precise impact on financial performance.

In 2017 the European Union adopted amendments to the Shareholder Rights Directive enacted a decade earlier. Among the changes was a new Article 9c dealing with the topic of related party transactions (RPT). This paper analyses how that new provision has been implemented in a range of Member States and assesses its impact on the prior laws of those states. Compared with the initial proposals of the European Commission, Article 9c as adopted was considerably watered down. Allegedly inspired by the related party provisions of the UK Listing Rules, those proposals mandated disclosure at the 1% level of significance (measured typically by the value of the company’s assets), accompanied by a fairness opinion, and approval by the independent shareholders (majority-of-the-minority (MOM)) at the 5% level). As enacted, MSS were given a choice of MOM or board approval and freedom to set the criterion for triggering the approval requirement. The same freedom as to trigger was accorded to the MSS in relation to disclosure and the requirement for a fairness opinion was dropped. In consequence, MSS had a wide range of choices to make at the transposition stage. A major focus of this piece is an analysis of the choices actually made by the MSS (Part 3). This provides a basis for the assessment in Part 4 of the impact of Article 9c in moving the laws of the MSS towards a more demanding orientation. There are three main conclusions. First, the requirements of Article 9c for approval of RPT had limited impact. No MS which did not already have MOM adopted it in the transposition process. As for board approval, which was already widespread in the laws of the MSS, it is doubtful whether the transposition of the Article ensured the independence of the board members called upon to approve the transaction. Second, it is likely that the most important change required by the Article was public disclosure, even if shorn of the fairness opinion. The adverse impact of disclosure on the company’s share price is potentially capable of reducing the levels of wholly one-sided RPT. Public disclosure, although already required by the laws of some MSS, was not widespread. Third, and more optimistic, there is evidence that the process of transposing Article 9c caused MSS to review their laws on RPT more generally and, in some MSS, this provided an opportunity for reformers to secure changes beyond those required by the Article itself. This might be termed the “catalysing” effect of transposition. The outcome in any particular MS turns on the balance of power between reformers and conservatives, but transposition gives reformers the opportunity to make a case which might otherwise not have been available to them.

In this paper I review Prosperity, which was published in 2018 by Colin Mayer, Professor and former Dean at the Said Business School at the University of Oxford. In Prosperity we find a passionate defence of the corporation as an institution. Mayer’s criticism mainly refers to how corporations have misbehaved and failed us in our era. As to possible remedies, M. rejects regulation as an appropriate response, save for financial firms. He would mainly rely on private law and corporate governance as a means to ground commitment to corporate purpose. He also suggests specifying corporate purpose in the articles of association of companies, a solution that has been recently adopted by the French legislator allowing them to define their raison d’etre in the statute. I argue, however, that there are limits to this remedy, for the wording of corporate purpose will often be generic; managers will always find ways to circumvent it; shareholders will find it difficult to monitor compliance; enforcement of similar undertakings in cases of breach will be too difficult. I also argue that regulation should have a greater say in disciplining corporations than Mayer suggests. We cannot rely on corporate governance and shareholders as the main instruments to preserve the integrity of corporations. A balanced view of corporate purpose requires a multidisciplinary approach to the corporation. No enlightened CEO would manage a large corporation by looking narrowly at the financial capital or by targeting exclusively shareholder wealth creation. Rather, she will consider all types of capital and try to optimize the management of each of them if she wants the firm to grow sustainably. Indeed, stakeholders are taken care of even in countries that do not follow the German model of corporate governance, but a shareholder primacy model. Stakeholders’ protection in these countries mainly depends on either contracts or regulation (such as environmental and labour laws), but also on corporate governance to the extent that stakeholders’ interests are considered at board and management levels. In particular, the theory of enlightened shareholder value suggests that shareholder wealth should be maximized in the medium-long term, which requires the interests of stakeholders to be met as a condition for maximizing the value of the firm. In conclusion, I argue that corporate purpose should be seen from the intermediate perspective of the enlightened shareholder value theory, which represents a sort of compromise between the traditional shareholder primacy theory and the stakeholder approach to the corporation. Moreover, corporate purpose should be specified and implemented in practice mainly by the board of directors and the top managers, who should reconcile the interests of the shareholders with those of other stakeholders and the community in general. There is no need to specify the purpose of the corporation in its charter, even without considering the difficulties of such a definition and of its enforcement in practice. The criticisms developed in this paper, however, do not detract from the obvious merits of Prosperity which are also highlighted. This excellent book will stimulate fresh thinking and research on corporate governance and the future of the enterprise in modern capitalism. In addition, it will influence the work of legislators and the action of those constituencies that want to defend the corporation from political attacks and heavy regulatory interference, while promoting its integrity and prosperity.

The legal regime applicable to groups of companies in the European Union has been discussed for many years. National legislations have been adopted in a certain number of Member States, and new initiatives are being considered by the European Commission and in academic writing. The central issues in groups of companies is the relationship between the controlling shareholder, often the parent company and the subsidiaries, and the potential for abuse to the detriment of the latter’s minority shareholders and creditors. Several answers have been formulated, ranging from a duty of the parent to indemnify the subsidiary for the charges imposed by the parent, to the acceptance of these charges provided they result in some benefit to the subsidiary and do not endanger the subsidiary’s solvency. In another approach, these issues may be solved by other common company law, e.g., on the basis of the unfair prejudice provisions. With respect to shareholder and creditor protection, a comparative analysis concludes that there is no need for additional regulatory safeguards. The present approaches indicate that group relations are often characterised by conflicts of interest. Therefore, it is proposed to develop a standard for dealing with these, especially under the form of related party transactions. The specific conditions for dealing with intragroup related party transactions are submitted for further discussion.

This chapter contributes to the debate on the future of European over-the-counter (OTC) clearing and relevant infrastructures in light of the Capital Markets Union and its re-configuration after Brexit. It begins by introducing some basic notions about clearing dynamics. It then analyses the available divorce options between the EU and the UK once Article 50 has been triggered, and their impact on clearing particularly in light of the European Market Infrastructure Regulation's equivalence regime. Next, it examines the worst-case scenario that would materialize if UK central counterparties (CCPs) were excluded from the single market, and considers possible network strategies that CCPs could adopt to remedy the consequences of Brexit.

In line with the European Commission's wish to create fully integrated European capital markets, its Capital Markets Union (CMU) Action Plan is intended to make it easier for providers and receivers of funds to come into contact with one another within Europe, especially across borders. This book discusses various aspects of CMU from a legal and/or economic perspective. The chapters are grouped in a thematic way, covering the following areas: (i) general aspects, (ii) Brexit, (iii) financing innovation, (iv) raising capital on the capital markets, (v) fostering retail and institutional investment, (vi) leveraging banking capacity to support the wider economy, and (vii) facilitating cross-border investing. This chapter outlines some general aspects of CMU that are not explicitly covered by the other chapters in this book: (1) the CMU objectives, (2) the EBU–CMU relationship, (3) regulatory burden, and (4) Better Regulation and the Call for Evidence.

This chapter focuses on FinTech, which offers firms and individuals new ways for accessing alternative sources of finance. It first examines the main types of alternative finance which technology has helped to develop and could further complement the traditional markets, focusing on marketplace investing and its perspectives in Europe. It then analyzes financial return crowdfunding as an application of marketplace investing; its main business models, such as investment-based and loan-based crowdfunding; and the risks and benefits deriving from them. Next, it compares the different regulatory models applicable to crowdfunding at EU and member states' levels, distinguishing between the traditional approach, which extends existing banking or financial regulation to these new sectors, and the ‘innovative’ approach contemplating ad hoc regimes for crowdfunding. The final section suggests a tailored policy approach to marketplace investing in the Capital Markets Union.

This chapter proposes a system for EU centralization of scrutiny and approval of public offers of securities or of listing of companies mature enough to conduct an IPO or those that seek a listing following a secondary offer. It first discusses the European Securities and Markets Authority's unique presence in the EU regulatory edifice and the true ambit and interpretation of its powers. It then sets out the preferred architecture and ambit for a possible European Listing Authority and Capital Markets Union–Securities and Exchange Commission (CMU–SEC), and the advantages their establishment could bring to the CMU project. Next, it discusses the legality of a possible CMU–SEC and brings the different strands of the present analysis into a comprehensive solution.

In this paper, we argue that a drastic impact of Brexit on UK CCPs should in principle be avoided, for the simple reason that they have so far provided efficient clearing services to counterparties located in other EU countries, so that their disruption would not be in the interest of Europe as a whole. Nonetheless, we do not go as far as arguing that the relocation of part of the OTC derivatives clearing which presently occurs in London to other EU countries should be avoided as certainly inefficient. While believing that clearing efficiency would be optimized through concentration of the clearing services in a small number of clearing houses, we acknowledge that the information presently available on the EU clearing economy does not always support the status quo. We also admit that a relocation of part of the clearing business to other EU financial centres could be efficient in the long-run if given conditions materialize, such as the shifting of a substantial mass of derivatives transactions to one or more CCPs in the Continent at a reasonable cost. We further argue that EU and national politics could determine an impact of Brexit on OTC derivatives’ clearing that is disruptive of the status quo without bringing net social benefits. Indeed, the protection of national interests and local constituencies could prevail over an informed view of the efficiency and stability of the clearing industry, which would imply leaving the choices to be made in one direction or the other to market participants. As a policy solution, we advocate a reform of EMIR strengthening the supervision of CCPs, including those located in third countries, along the lines recently proposed by the European Commission. Nevertheless, we suggest some amendments to the Commission’s proposal that are directed to avoid the disruption of the clearing industry which would be caused by the proposed regulatory requirements. A similar reform would entitle not only ESMA and the national competent authorities, but also the central banks of issue, the ECB in particular, to effectively supervise third-country CCPs and protect the financial stability of the Union. Moreover, the central banks of issue would be able to provide liquidity to CCPs and their clearing members, particularly in stress situations. However, we advocate a clearer recourse to substitute (or comparative) compliance for third country CCPs and reject the idea of a location requirement that under the Commission’s proposal could be imposed to third country CCPs in extreme circumstances.

Currently, the Council of the European Union is negotiating the European Commission’s recent proposal on cross-border mobility. This paper provides an overall assessment based on the proposal’s central pillars: freedom of establishment and protection of the interests of creditors, shareholders, and employees. The proposed directive meets a real necessity for regulation on a European level and pursues an ambitious agenda. While the general approach is excellent, there is room for improvement on some issues of importance.

The European Commission points out that we are increasingly faced with the catastrophic and unpredictable consequences of climate change and resource depletion. The Commission claims that current levels of investment are not sufficient to support an environmentally-sustainable economic system that fights climate change and resource depletion. According to the calculations of the Commission, more private capital flows need to be oriented towards sustainable investments to close the €180-billion gap of additional investments needed to meet the EU’s 2030 targets of the Paris Agreement. The Commission concludes that the financial system has a key role to play here.

In this paper, I try to assess the likely impact of the Single Supervisory Mechanism (SSM) on eurozone banking markets. I start by analysing the predictions made by economists and policy-makers with regard to the deeper integration of financial markets which may derive from the Banking Union. I then try to identify the regulatory weaknesses that may throw uncertainty on the benefits commonly expected from the Banking Union. Firstly, I highlight the limits of EU supervisory centralisation as shaped by the reforms enacted after the 2008 financial crisis. Secondly, I analyse the limits of the SSM, which, to some extent, is still grounded on supervisory cooperation despite the fact that the ECB has powers of direction and substitution with respect to national supervisors. I argue, in particular, that the SSM represents a system of semi-strong centralisation, which may still give rise to agency problems, particularly in the relationships with supervisors of non-euro area countries that are still governed by the EU system of enhanced cooperation. Thirdly, I examine the decoupling of supervision from regulation, which derives from the fact that the ECB lacks sufficient regulatory powers when acting as a supervisor of the eurozone banking systems. The separation of regulation—which is harmonised (often with excessive detail) at EU level—and supervision—which is centralised in the euro area—may create problems to the extent that the single supervisor cannot create a prudential rulebook for the eurozone but is subject to EU prudential regulation and national law provisions, often unduly limiting its supervisory discretion.

In this paper we analyze the relationship between conformity to executive remuneration standards, corporate ownership, and the level and structure of CEO compensation for large European listed companies in the years 2007 and 2010. We show that controlled corporations conform to executive remuneration standards less than widely held firms. We also show that weaker compliance is associated with lower CEO pay and more cash-based incentive structures. We interpret this “conformity gap” from the perspective of individual firms and from a societal perspective, with the aim to contribute to frame the policy questions concerning executive pay at controlled corporations. Different policy implications depend on whether the conformity gap reflects a lower need for managerial incentives, given the monitoring by controlling shareholders, or the latter’s willingness to extract private benefits of control. We argue in this paper that the former hypothesis prevails, so that regulators should abstain from increasing the level of enforcement of executive remuneration standards.

The consequences of the Brexit vote will be felt throughout the legal systems, both in the UK and in the EU. The legal consequences of the Brexit decision and the process which will lead to the withdrawal of the UK, raises numerous questions many of which are in the process of being analysed, and possibly solved. In the field of company law, with respect to cross-border matters, UK companies will be exposed to national laws in the EU States after the Treaty freedom of establishment will not further apply. This may lead to tensions between the two systems of recognition of foreign companies, i,e. the incorporation theory and the seat theory. Foreign companies active in seat jurisdictions may in the future be disqualified if their seat is effectively established in the seat State. Access may become more difficult, not on the basis of company law, but of sectoral regulations. In other part of the regulatory system, such as the rules on cross-border mergers, on rights of shareholders in listed companies, or disclosures to be made, equivalence of rules, as decided by the European Commission, will be the key factor. Additional issues will arise for the cross-border recognition of accounting standards and for the activity of auditors.

The controversial and long-awaited Commission Proposals to revise the cornerstone Markets in Financial Instruments Directive 2004 (MiFID I) were presented in October 2011. The Proposals are currently going through the Council and Parliament negotiation process, and final agreement is expected sometime in 2013. This article places these important reforms (together, MiFID II) in context by examining the impact of MiFID I since its application to EU financial markets in November 2007, and by considering what MiFID I’s impact suggests for the design of MiFID II. It considers how MiFID I reshaped the EU share trading marketplace and how the dominant interests which shaped MiFID I’s regulatory design fared. It also examines how those interest groups are seeking to shape MiFID II, and the implications. It suggests that the influence of interest groups may have led to overly ambitious MiFID II Proposals which are excessively concerned with investment firm and trading platform interests, and not sufficiently focused on the overall efficiency and effectiveness of EU share trading markets. It calls for a more modest approach to reform, based on fine-tuning MiFID I.

In this paper we analyze the relationship between conformity to executive remuneration standards, corporate ownership, and the level and structure of CEO compensation for large European listed companies in the years 2007 and 2010. We show that controlled corporations, either family or State owned, conform to executive remuneration standards less than widely held firms. We also show that weaker compliance is associated with lower CEO pay and more “conservative” incentive structures. We interpret this “conformity gap” from the perspective of individual firms and from a societal perspective, with the aim to contribute to frame the policy questions concerning executive pay at controlled corporations. Different policy implications depend on whether the conformity gap reflects a lower need for managerial incentives, given the monitoring by controlling shareholders, or the latter’s willingness to extract private benefits of control. We argue in this paper that the former hypothesis seems to prevail, so that regulators should abstain from increasing the level of enforcement of executive remuneration standards.

The legal regime applicable to groups of companies in the European Union has been discussed for many years. National legislations have been adopted in a certain number of member states, and new initiatives are being considered by the European Commission and in academic writing. The central issues in groups of companies is the relationship between the controlling shareholder, often the parent company and the subsidiaries, and the potential for abuse to the detriment of the latter’s minority shareholders and creditors. Several answers have been formulated, going from a duty of the parent to indemnify the subsidiary for the charges imposed by the parent, to the acceptance of these charges provided they result in some benefit to the subsidiary and provided they do not endanger the subsidiary’s solvency. In a third approach, these issues may be solved by other common company law, e.g. on the basis of the unfair prejudice provisions. With respect to shareholder and creditor protection, a comparative analysis concludes that there is no need for additional regulatory safeguards. The present approaches indicate that group relations are often characterised by conflicts of interest. Therefore, it is proposed to develop a standard for dealing with these, especially under the form of Related Party Transactions. The specific conditions for dealing with intragroup related party transactions are submitted for further discussion.

We examine the political dynamics which led to the codification of the Principles and Standards for sound compensation practices at financial institutions at international (G 20) level and to their subsequent implementation on both sides of the Atlantic. We show that the regulation of bankers’ pay is presently more detailed and less flexible in Europe than in the US, despite the fact that the 2008 crisis originated in the latter country and the levels of executive pay were no doubt higher in the US than in Europe. We also find that remuneration practices at large US banks are strongly converging towards the international Principles, well beyond what required under applicable regulations. As a result, both EU and US compensation practices at large banks generally converge, whilst the framework is more divergent when considering banks that are less complex and do not have significant international activities.

This article considers the regulation “on the books” of executive pay across the EU and the evidence “in action” on corporate practice concerning executive pay (based on disclosures by FTSE Eurofirst 300 companies) in relation to the best practice recommendations set out in two key Commission Recommendations from 2004 and 2005. It finds that Member State implementation of the two Recommendations has been patchy and, in particular, that reliance on Corporate Governance Codes has not resulted in the embedding of good practices, particularly with respect to disclosure concerning executive pay, across Europe's largest companies. It argues that if the EU is to succeed in promoting stronger alignment between shareholder and manager interests by means of the executive pay contract, closer attention is needed to remuneration governance and that a mandatory, harmonised disclosure obligation should be introduced. Although the Commission has recently adopted a 2009 Recommendation on executive pay in the corporate se...

Key points: • This article considers how the recent market turmoil affected national banking systems, thereby prompting state measures; • It describes the remuneration problems shown by the financial crisis: rewards for failure; short-term behaviour; inappropriate design of performance incentives; practice of overstating profits reflected in cash bonuses and short-term gains through stock options; and guaranteed bonuses unrelated to financial results and severance payments. • The article discusses the conditions relative to bankers’ remuneration structures and policies imposed on ailing banks by governments in their rescue packages, providing a transatlantic perspective and an analysis of the UK, French and German frameworks. • The changes in remuneration policies are illustrated through two case studies: one study compares the policies at Lloyds and Royal Bank of Scotland with those at non-ailing banks in the UK; the other compares remuneration policies at UBS and Credit Suisse. • The article analyses how the debate extended internationally to the whole banking sector, with managers’ pay becoming a new area for regulation and supervision post-crisis. • The conclusion reached is that the crisis generated a race to the top in the area of bankers’ pay, leading large banks to self-restraint and to a longer term, risk-cautioned approach to incentive practices.