The European Commission has issued a call for evidence and a public consultation on the issue of corporate reporting. The Confederation of Swedish Enterprise have published a position paper.
The European Commission has issued a call for evidence and a public consultation on the issue of corporate reporting. To address this, the Confederation of Swedish Enterprise, the Association for Generally Accepted Principles in the Securities Market, the Swedish Corporate Governance Board, FAR (the institute for the accountancy profession in Sweden) and the Council for Swedish Financial Reporting Supervision, have published a joint position paper. This sets out the combined view of these organisations to the issues identified by the Commission.
We agree with the European Commission that it is essential that investors have trust in the market. However, we remain to be convinced that amendments to EU legislation are the required approach for addressing the relatively few issues of corporate failures that the Commission has highlighted.
It is not easy to assess the situation in the EU as a whole without an in-depth analysis of the situation in each of the EU Member States. Therefore, it is vital to properly understand the root cause of the problems related to corporate failures. These may not be the result of weak regulation. There are other plausible explanations, such as the applicable rules not having been followed, poor corporate culture or any of a number of other sets of circumstances, all of which would be difficult to address by amending rules. Isolated corporate failures resulting from criminal actions cannot and should not be attributed to general deficiencies in regulation on EU level.
Whatever rules are put in place, future corporate failures are inevitable. Any proposed amendments to the EU legislation therefore must be carefully assessed and weighed against other measures. It is important that any measures taken must be both relevant to the problem identified and proportionate. We are concerned that any intervention that adds more rules for corporate governance and audit, based on the European Commission’s description of the problems in its call for evidence, may actually increase the administrative burden for listed companies without bringing any real benefits for stakeholders or companies. Therefore any proposed measures should be subject to a cost/benefit analysis. This should also be seen in the light of other measures by the EU that affect corporate reporting or corporate governance that have already been adopted or are in the pipeline. These include reporting according to the taxonomy and the initiatives on Corporate Sustainability Reporting Directive (CSRD) and on sustainable corporate governance.
The Swedish capital market is an important source of finance within the EU. More than 400 companies have their shares listed for trading on a regulated market in Sweden with a total market capitalisation of nearly 12,000 billion SEK (1140 billion Euro).
We believe that the quality and reliability of corporate reporting by listed companies in Sweden is already high, with very few failures recorded. We consider that this is a result of – among other things - strong corporate governance, high-quality audits, transparent reporting and efficient supervision and enforcement. In our view, this suggests that there is no real need to amend the EU regulation in order to make the Swedish capital market more efficient or increase trust among stakeholders.