5.8.2 Conclusions

By means of three research methods - univariate, bivariate and multivariate analyses - the answer is sought to the research question specific to this chapter:

As analysed by comparative empirical research of five Member States: how has the comply or explain principle been applied in practice within the EU in recent years and to what extent is convergence visible in regulation and application?

In the underlying study, 100% application of the code provisions is not argued for, but for 'applied and explained sufficiently' (apply the code provisions and, for the deviations, provide a sufficient explanation: 100% level of compliance III) (see section 6.4.4), since in that case the 'one size does not fit all' and 'made to measure' approach are taken into account, whilst the comply or explain principle is applied as intended. Nevertheless, a satisfactory level of code compliance has not yet been reached: since all the explanations for non-compliance can still not be considered sufficient (40.2 per cent is still insufficient). The results of the univariate analysis show that year-wise the code compliance increases together with the quality of the explanations in the case of non-compliance, but this increase also levels off. The univariate analyses even show decreases for Belgium and the Netherlands in 2007 compared to 2006. Possibly the attention paid to code compliance has reduced, companies have become stuck in routine or think they can get away with less compliance since shareholders do not seem to pay attention to code compliance (for further discussion see 6.4.4). Overall a fixed set of code provisions complied with least can be seen, quite similar per country and mainly involving the establishment of committees regarding nomination and remuneration, the remuneration and shareholdings of directors, independence criteria for directors and appointment periods. The reasons provided for the non-compliance with these provisions too often still lack the desired quality, which is remarkable since society explicitly desires improvement of these matters and extensive regulation has been developed in the codes. The bivariate and multivariate analyses add to the answer of the research question that the period of time the comply or explain principle has been applicable does matter as regards the level of compliance, which is confirmed by the multivariate results. The longer the principle has been applicable, the higher the level of compliance. Moreover, the bivariate results showed that companies with a larger market capitalisation do not necessarily have a higher compliance rate, but their deviations are explained more sufficiently than is the case for smaller companies. Companies quoted on the country's main stock exchange index have and are predicted to have a higher and more sufficient level of compliance than companies listed on the first and subsequently second to main stock exchange index. The fact that smaller companies do deviate from more code provisions than larger companies is not all that surprising, given for instance their smaller number or supervisory board members and then the obligation to establish three key committees. However, the fact that their deviations are explained less sufficiently than is the case for larger companies is not a desirable development and can be considered a corrosion or degradation of the comply or explain principle (see section 6.4.4). The comply or explain principle embedded in non-statutory norms results in the highest compliance rates compared to the other judicial corporate governance arrangements (pure self-regulation, the principle facilitated by statutory rules and metaregulation), although in the linear regression models it is analysed that self-regulation is predicted to score best compared to meta-regulation and, when taking the quality of the explanations into account, the corporate governance arrangement with statutory rules predicts the highest level of compliance compared to meta-regulation. A convergence in the application of the principle is visible due to an overall increase in compliance and comparable code provisions often not complied with. Nevertheless, the manner in which the corporate governance statement is presented varies and the difference in corporate governance arrangements does have an effect on the level of compliance.

The main conclusions of the research as conducted in the underlying chapter, to be elaborated upon further in chapter 6 where the underlying empirical as well as theoretical research on the comply or explain principle are analysed simultaneously, are: