Call for a Redirection of EU Sustainable Corporate Governance Reform Proposals

We call on the European Commission to redirect its far-reaching proposals for sustainable corporate governance. Game-changing proposals should be based on careful research in accordance with scientific evidence. This is currently not the case.



11 May 2021

To the European Commission

Call for a Redirection of EU Sustainable Corporate Governance Reform Proposals

We call on the European Commission to redirect its far-reaching proposals for sustainable corporate governance. Game-changing proposals should be based on careful research in accordance with scientific evidence. This is currently not the case. We urge the Commission to reflect on the substantial concerns raised by the European business community and by leading scholars . The Commission’s hasty policymaking on sustainable corporate governance is underpinned by erroneous and biased assumptions that are likely to have unintended and undesirable consequences.

Our concerns

  • The notion of European businesess as short-termist and opposed to sustainability is wrong. On the contrary, in international comparison, European corporate governance is characterized by long-term owners and strong stakeholder protection, for example through employee representation. Moreover, European businesses are eager to take the lead in sustainability and a new green deal.
  • Share buybacks, dividends, incentive systems and earnings announcement are not indicators of short-termism, but indicators of a well-functioning modern stock market. When companies have more cash than they can profitably invest, the excess should be paid out to avoid mismanagement and agency problems. Shareholders reinvest the funds in beneficial projects elsewhere.
  • Uninformed experiments with sustainability commissioners on company boards, stakeholder councils, political directors’ duties and weakened accountability to shareholders risk seriously weakening European corporate governance and the agility of European businesses.
  • The proposed reforms will prevent European businesses from taking the global lead in sustainability because they will be bogged down by red tape, risk aversion and governance conflicts.
  • Rash, radical regulation risks alienating the European business community as well as the academic community thus fostering discord in European Union rather than a common striving for a sustainable society.


The European Commission is currently considering EU legislation on ”sustainable corporate governance”. The legislation is based on a study by Ernst & Young (EY) Italy on ”Directors’ Duties and Sustainable Corporate Governance” which the Commission commissioned and published in 2020. The Commission has concluded that “the Study found a clear trend of short- termism in the focus of EU companies. It identified key drivers of this issue, ranging from the narrow interpretation of directors duties and the company’s interest with the tendency to favour the short-term maximisation of financial value, through growing pressure from investors and the lack of a strategic perspective on sustainability all the way to the limited enforcement of the directors’ duty to act in the long-term interest of company. In order to lengthen the time horizon in corporate decision-making and to promote a corporate governance that is more conducive to sustainability, the Study also identified specific objectives that EU intervention could aim to reach”.

However, the ”evidence” published in the EY report is erroneous and biased. The ensuing consultation process (Sustainable corporate governance ( led to scathing criticism from academics and business organisations. A 3-day hearing (Directors’ Duties and Sustainable Corporate Governance | ECGI) on the report by the European Corporate Governance Institute (ECGI) – the highest academic authority on corporate governance in Europe – concluded that the report should be ”disregarded” altogether. There was “…unanimous agreement that corporate governance is central to sustainability, but that most of the actions proposed in the EY Report are not those that are needed to deliver on the sustainable growth objectives. Worse, if implemented, they could do harm.”

Neverthelessthe EU Commission’s Inception Impact Assessment (Bæredygtig virksomhedsledelse ( and the highly biased consultation of the 26 October 2020 demonstrate that the Commission has taken the study’s findings at face value. Acall for reflection” signed by ECGI members around the world – from Oxford, Harvard, Insead and other leading universities – therefore recommended that the ”Commission carefully consider the substantial concerns raised through the consultation” since ”well-intentioned but ill-considered prescriptive corporate governance reform can make it harder, not easier, to address the pressing social challenges.”

Laura Arranz Aperte, Hanken School of Economics
Paul Krüger Andersen, Aarhus University
Gabriel R.G. Benito, BI Norwegian Business School
Andri Fannar Bergþórsson, Reykjavik University
Tore Bråthen, BI Norwegian Business School
Ulrika Danielson, Andra AP-fonden (AP2)
Ossian Ekdahl, Första AP-fonden (AP1)
Johan Eklund, Swedish Entrepreneurship Forum
Søren Friis Hansen, Copenhagen Business School
Bersant Hobdari, Copenhagen Business School
Martin Holmen, Gothenburg University
Gustav Johed, Stockholm University
Morten Kinander, BI Norwegian Business School
Christina Kjær, Copenhagen Business School
Mårten Knuts, Krogerus Helsinki
Erik Lidman, Gothenburg School of Business, Economics and Law
Troels Michael Lilja, Copenhagen Business School
Eva Liljeblom, Hanken School of Economics
Peter Lundkvist, Tredje AP-fonden (AP3)
Minna Martikainen, University of Vaasa
Petri Mäntysaari, Hanken School of Economics
Henrik Nilsson, Stockholm School of Economics
Lars Christian Ohnemus, Copenhagen Business School
Ulf Larsson Olaison, Jönköping International Business School
Conny Overland, Gothenburg University
Konrad Raff, Norwegian School of Economics
Trond Randøy, University of Agder
Tine Roed, Copenhagen Business School
Per Samuelsson, Lund University
David Jonas Schröder, Copenhagen Business School
Matti J. Sillanpää, Turku School of Economics
Gustaf Sjöberg, Stockholm University
Fredrik Sjöholm, Research Institute of Industrial Economics
Sven-Erik Sjöstrand, Stockholm School of Economics
Daniel Stattin, Uppsala University
Therese Strand, Copenhagen Business School
Øystein Strøm, Oslo Metropolitan University
Per Strömberg, Stockholm School of Economics
Carl Svernlöv, Uppsala University
Steen Thomsen, Copenhagen Business School
Karin S. Thorburn, Norwegian School of Economics
Veikko Vahtera, Tampere University
Mika Vaihekoski, University of Turku
Seppo Villa, University of Helsinki
Emilia Vähämaa, Hanken School of Economics
Niels Westergaard-Nielsen, Copenhagen Business School
Daniel Wiberg, The Swedish Federation of Business Owners
Daniel Yar Hamidi, University of Borås
Charlotte Østergaard, BI Norwegian Business School

The page was last edited by: Department of Accounting // 05/19/2021