4.3.5 What is the judicial corporate governance arrangement in the country under review?

The Belgian corporate governance committee has chosen for the comply or explain approach since it is recommended by the OECD and EU commission and used in many countries. Moreover, the flexibility provided by this principle has been preferred to a strict and rigid application of a detailed set of rules because it allows the company's specificities, such as size and shareholding structure, to be taken into account (Belgian Code 2009, p. 8). Initially judicial corporate governance arrangement A seemed applicable to Belgium; pure self-regulation and no embedding of the comply or explain principle in listing rules or legislation. The characteristics of judicial corporate governance arrangement A are: (i) less detailed company law, (ii) no overlap between code and law, (iii) and the code is an alternative for legislation. Moreover Wymeersch states regarding arrangement A that "the implementation ofcodes is voluntary and based on self proclamation while its enforcement is based on the assessment by market forces" (Wymeersch 2005, p. 2). Before the enforcement of the Corporate Governance Act in August 2002, judicial corporate governance arrangement A did apply to Belgium, since its company law was not that detailed (i), overlap between the three existing corporate governance codes was avoided (ii) and they were an alternative for legislation (iii). The situation changed slightly after the publication of the Belgian corporate governance code in 2004. Company law was detailed by then due to the Corporate Governance Act. Although there was not much overlap between the code and legislation, the code is complementary to existing law and no provision may be interpreted as derogating from Belgian law (Belgian Code 2009, Preamble). Not all of the characteristics of corporate governance arrangement A still applied. But with respect to the embedding of the comply or explain principle nothing changed until Directive 2006/46/EC. The directive had to be implemented before 5 September 2008, but Belgium was rather late with the implementation. Only on 6 June 2010 a legal embedding (De Wulf, Van der Elst et al. 2010, p. 20) of the Belgian code and the comply or explain principle was established in the Royal Decree Assigning the Code (Belgisch Staatsblad 2010, 39622-39699) and in the Law on Reinforcement of Corporate Governance in Listed Companies that modified the Code on Companies (Belgisch Staatsblad 2010, 22709-22719). In article 1 of the Royal Decree the Belgian corporate governance code 2009 is designated a code under article 96 § 2 of the Code on Companies. Article 96 § 2 of the Code on Companies states that listed companies need to have a corporate governance statement in their annual report which discusses at least which code is applicable, where this code can be found and, in so far as the code is not applied fully, an explanation of the reasons for non-compliance. To summarise, nowadays judicial corporate governance arrangement C (self-regulation supported by statutory rules) applies to Belgium, since the code and comply or explain principle are embedded in legislation. The Belgian corporate governance commission considers the comply or explain approach to be a core element in aligning the interests of all parties involved (Van der Elst 2008, p. 12) and Directive 2006/ 46/EC has been implemented, although much too late.