4.3.9 Summary question: What are the developments after having the comply or explain principle in place for several years?

The Belgian corporate governance debate started rather late and was triggered by the fact that the international capital markets required more transparency and Belgium had to become more market-orientated to defend its competitive position (Solomon 2007, p. 198) (De Wulf, Levrau et al. 1999, p. 36). On 2 August 2002 the Corporate Governance Act was enacted that modified the Code on Companies assessing corporate governance related topics. In response to the EU Company Law Action Plan the Belgian corporate governance committee, under the chairmanship of Maurice Lippens, published its first corporate governance code in 2004, subsequently modified in 2009. The objective of the Belgian corporate governance code is long-term value creation, not only for shareholders but for all other stakeholders. The code's contents in general focus strongly on the board's composition and functioning, and emphasise the importance of an adequate disclosure of the company's corporate governance structure. The Belgian corporate governance model is characterised by a hybrid board model called sui generis (Byttebier, Piu et al. 2003, p. 141), due to the possibility of having an executive committee which forms an extra level under the board and to which several management powers are attributed. Another typical feature is the controlling shareholders - e.g. holding companies and pyramidal structures - who often have a decisive influence on board composition and the orientation of the company's policy. Due to the fact that the Belgian code is strongly influenced by the UK Cadbury Report and aims at defending its competitive position, the above cultural features are not or hardly mentioned in the codes, whilst for example agency problems between the controlling shareholders and the minor shareholders are an actual topic. Clearly the code exists next to the extensive Belgian corporate law that regulates the typical Belgian features. Corporate governance arrangement C (self-regulation supported by statutory rules) nowadays applies to Belgium since the code and the comply and explain principle are embedded in legislation (article 96 § 2 of the Code on Companies). This implementation of Directive 2006/46/EC on 6 June 2010 was, however, rather late. Disclosure concerning code compliance is performed by means of a corporate governance statement in the annual report that is updated regularly, and for which the board of directors is accountable. The supervisors of code compliance are explicitly discussed in the code's preamble and the shareholders, the FSMA and the statutory auditors are assigned as supervisors. Over the years Belgian code compliance has been tested by several institutes and researchers. The conclusion is that the point of saturation has not been reached yet and too often the explanations in the case of non-compliance are still insufficient. Reoccurring deviations concern the rules on conflicts of interests, disclosures, the possibility of putting items on the agenda of the shareholders' meetings, remuneration disclosures and the remuneration committee.

With respect to the optimum framework (section 4.1.2 and table 4.3.9) Belgium has made improvements in recent years but a few more alterations are necessary to reach the optimum framework defined, such as annual monitoring of code compliance, further clarity about the accountability rules and ensuring that the Belgian code remains up-to-date and relevant to Belgian practice.

Although the Belgian corporate governance practices have improved significantly since the beginning of the debate, some drawbacks must be pointed out. According to Van der Elst, despite all the improvements, Belgium still scores lower than the European average on corporate governance ratings (Van der Elst 2008, p. 37). Van der Elst states that it is questionable whether this will improve in the short term, especially since: (i) with the exception of the CEO, only globalised remuneration figures of the other board members have to be disclosed and (ii) the Belgian feature of the controlling shareholder remains obscure since the control structure of the company does not need to be published (Van der Elst 2008, p. 37). To summarise, with respect to corporate governance Belgium can be considered a kind of late arrival that diligently copied from the UK corporate governance best practices while slightly neglecting its own cultural features. A positive side-effect of this copying behaviour is that Belgium's code and comply or explain principle are perfectly in line with what is considered to be EU standard practice on corporate governance.