Belgian listed companies are much more compliant with the Code on Corporate Governance now than a year ago, according to a new study (French - Dutch) conducted by the Financial Services and Markets Authority (FSMA).
'The FSMA is delighted by the considerable progress in compliance with and application of the Corporate Governance Code. We are convinced that our action in conjuction with our previous study contributed significantly to this progress. At the end of 2010, each company was sent an overview of its individual performance, with the intention that it take this into consideration when preparing its corporate governance statement for 2010, and the results are very positive’, notes the chairman of the FSMA, Jean-Paul Servais.
In December 2010, the CBFA, predecessor of the FSMA, had published an initial study on corporate governance. That document examined the extent to which Belgian listed companies in their 2009 annual financial reports complied with certain disclosure requirements of the 2009 Belgian Corporate Governance Code.
That study indicated that a number of provisions of the code were not being fully complied with. It also made recommendations for improving the provision of information in the run-up to the entry into force of the Law on Corporate Governance.
The Law has given a legal foundation to the Corporate Governance Code as well as to the "comply or explain" approach. This means that companies which do not comply fully with the Code must explain why they do not. Moreover, the Law has incorporated a number of provisions from the Code, thus precluding any exemption from their application.
The Law on Corporate Governance entered into force in several phases, with numerous provisions having to be implemented in the annual financial reports for 2010. In order to determine whether companies have shown progress in this regard, the FSMA followed up the December 2010 study with a new one, based this time on the 2010 annual financial reports.
The FSMA has identified a substantial improvement in the compliance with and application of the 2009 Code:
- the provisions regarding the features of the internal control and risk management systems are complied with and applied by 92% of the companies (as compared to 45% and 46% respectively in the previous study);
- the provision regarding information on the evaluation process is complied with by 53% and applied by 66% of the companies (as compared to 30% and 36% respectively in the previous study).
As regards the remuneration report, the contents of which will be required to fulfil the provisions of the Law on Corporate Governance only next year, and for which the FSMA expects to see significant progress in the 2011 financial reports, the following observations may be made:
- the provision regarding the description of the procedure for developing the remuneration policy and determining the remuneration level is already complied with by 70% and applied by 80% of the companies (as compared to 55% each in the previous study);
- the provisions regarding information on the basic and variable remuneration of the CEO and other executive managers are complied with by 70% and applied by 90% of the companies (compared to 61% and 78% respectively in the previous study);
- information on the share options for the CEO is provided by 81% of the companies (as compared to 61% in the previous study).
 Companies that comply with the Code or that explain why they do not are considered to apply the Code.