6.2 Improved variety of corporate governance systems

Section 1.3 of this study elaborates upon the convergence debate and the different corporate governance schools, since the role, defining and future of the EU corporate governance framework and thus the comply or explain principle are still under debate. An important question within this debate is which corporate governance model will ultimately dominate. The underlying study concludes that a conversion into one standard and superior model is unlikely to happen (the diversity school). Due to path dependence (see section 3.3.2), differentiation in types of firms, shareholder strategies and specific agency problems, national systems will evolve further in line with their cultural and historical features and it is believed that attempts to create a 'one size fits all' model will fail. Hence an improved variety of governance systems based on national cross-references is argued for, or in other words: the systems will improve by learning from each other. Four conditions are of importance in this respect: (i) an 'Olympic' minimum set of principles, (ii) opting for self-regulation with strict monitoring, (iii) a focus on transparency and disclosure and (iv) partial harmonisation to create a European level playing field (Van den Berghe 2002, p. 178). Mainly based on a bottom-up approach and cross-reference within the EU, it is believed that condition (i) has already almost been achieved by means of the national corporate governance codes and EU directives. Condition (iv) involves the EU corporate governance framework that is still under construction and that needs to be optimised with the comply or explain principle in place. Conditions (ii) and (iii) (self-regulation with strict monitoring and a focus on transparency and disclosure) are the main topics in the underlying study. They involve the conditions that need to be put in place for the comply or explain principle to work properly and as intended.

Arguing from the standpoint that a variety of corporate governance systems need to be improved by cross-reference and based on the insights gathered from the research on the comply or explain principle in practice (chapters 4 and 5), the recommendations aimed at contributing to a common understanding of the comply or explain principle's scope and the conditions that need to be put in place for it to work effectively within the EU are elaborated upon further below.