The Current Challenges for EU Company and Financial Law and Regulation

Abstract

European company and financial law and regulation have been evolving over time along with business and financial practices. The resulting ‘social licence’ established by company and financial law and regulation aimed to balance the granted privileges of limited liability and share transferability with the corporate social contribution to economic development and employment. Recent transformations driven by shareholder value and financialisation have been challenging this balance of interests between stakeholders (including employees and shareholders) and society. The EU institutional framework may respond to these challenges by reaffirming the centrality of the enterprise as a going concern. On this basis, corporate accountability and responsibility may be enforced to make ongoing corporate affairs accountable and responsible for their contribution to economy and society. Ongoing corporate capacity to cope with social and environmental responsibilities may be assured along with the fair and sustainable remuneration of stakeholders, including shareholding investors, and a fair tax contribution. The EU institutional design and policy mix may be organised to respond to this comprehensive set of corporate dimensions. Here the most relevant fields to be reconsidered include: enterprise groups and corporate social responsibility; financial reporting and transparency; financial investment and asset management.

An embezzler test for norms, standards and regulations

“…We do not test whether a particular norm, standard or regulation has been, or will be abused for embezzlement motives, but rather whether the norm, standard or Test for norms, standards and regulations regulation can facilitate the abuse of trust without being subject to detection or an applicable sanction. Several examples of abuse can be cited, such as creative accounting (Gupta and Kumar, 2020;Lokanan, 2019), using actual economic norms for the diversion of funds through the payment of non-legitimate bonus and dividends obtained out of inflated profits (Crutchley et al, 2007;Ndzi, 2019;Oppenheimer, 2011;Young, 2020), or abusive tax avoidance through cost inflation to reduce taxable income, or the transfer of assets to countries with lower tax regimes with the adoption of abusive transfer prices (Autenne et al, 2018;Beer et al, 2021;Bridges, 1997;Peacock, 1997;Quentin, 2016;Riedel, 2018). To be clear, we are not claiming that all these abuses are related to specific standards, norms or regulations, but rather, we are evaluating whether specific standards, norms and regulations can facilitate the occurrence of embezzlement.…”

The Contest on Corporate Purpose: Why Lynn Stout was Right and Milton Friedman was Wrong

“…The Social License to 0perate resonates with the traditional relationship-based approach to business in Europe, and the modern interpretation of the Social License to 0perate is accepted widely by corporations throughout Europe and the UK. Now with the US Business Roundtable's new declaration of corporate purpose the social license will be considered by more large corporations in the United States (Autenne et al, 2018;British Academy, 2018;Business Roundtable, 2019;Clarke, 2019). The social license is central to a new OECD initiative on Trust in Business, and appears to resonate with business internationally, and to relate closely to the United Nations Sustainable Development Goals (OECD, 2019;UNEP, 2020).…”

“…The Critical Corporation Project (2012-18) at the Cass Business School at City University, London, has investigated the contemporary corporation from a critical perspective (Baars & Spicer, 2017), and the Frank Bold international law firm is conducting the Purpose of the Corporation Project (Frank Bold, 2019). Finally, the European Law Institute has launched a major research project on corporate sustainability (Autenne et al, 2018;ELI, 2019).…”