Consob commissioner sees virtue in governance dualism

Luca Enriques is both a scholar and a practitioner. His seat at the University of Bologna has been empty much of the last several years that he has spent on the Italian securities commission Consob. He brings, therefore, a dual perspective to issues in corporate governance and financial regulation, and he thinks the dual tracks may be the right way forward. He told a meeting of the European Union's Corporate Governance Forum in Warsaw to cut through the red tape company law needs to head in two different directions, which some people may find contradictory.

• Protection against expropriation …: Investors in European companies need better protection from managers and dominant shareholders, who can extract economic rents at the cost of "minority" shareholders. Europe needs to extend rules on insider trading to require notification of trades by controlling shareholders as well as managers.
  
• … but with limited application: Controlling shareholders are a big and powerful force, and they would seek to block such legislation, enlisting other vested interests in their support. So Enriques suggests the new rules apply only to companies newly coming to the stock market. "A new regime, lighter in terms of strings attached to ordinary course of business, non-conflicted decisions, and specifically and effectively addressing expropriation by managers and dominant shareholders, could be one way ahead," he said.

To get around the stigma of a company listing under a lighter weight regulatory regime, he suggests that such newly listed companies would, by default, still meet the tighter rules, but could choose to opt out of them in exchange for greater minority protection.

Source document: The remarks of Enriques can be read in full in a five-page pdf file.