"Listed companies and legislators in dialogue" - speech made by the Minister, 17. november 2005
(Check Against Delivery)
 

Introduction

· Ladies and gentlemen,

· I am delighted to see that you have all responded positively to the invitation to meet here today.

· I would particularly like to thank our guests from abroad for coming to share their views and experiences with us.

· I am confident that you will enrich this conference with your international perspective on today’s very important topic: the international regulation of listed companies.

Globalisation

· Denmark - and indeed the rest of Europe - faces a growing challenge from globalisation.

· The competitive pressure from countries such as India and China is growing.

· And we have to create framework conditions which will enable us to meet this challenge.

· On the one hand, if we cannot be cheaper - we must be better.

· On the other hand, getting better is by no means cheap. If they are to innovate, businesses need capital.

The Benefits of Listing

· Which is why today's topic is so important.

· Listed companies are of great importance in attracting investments.

· Companies, their investors, society as a whole – all benefit from listing.

· Companies gain access to capital.

· And, for investors, listing ensures that companies comply with a number of requirements - particularly in respect of disclosure.

· But we have to find the right balance between the benefits and burdens of listing.
· If requirements for listing are inadequate, investors may lose confidence in the market.

· If our demands and requirements are too great, companies will choose not to list. That is our dilemma.

The Burdens of Listing

· Recent years have seen an increase in the number of requirements to be met. And yet, if we look at the capital market, there are some indications that we are demanding too much.

· The number of listings is going down.
· Some companies no longer find it attractive to use the traditional stock exchange to raise capital.

· Instead they direct their attention to alternative markets or private equity funds. This particularly seems to be the case for smaller companies.

The Challenge for Regulators

· We must therefore ensure that companies are confronted with optimum listing requirements.

· We must reduce the burdens of regulation - both in Denmark and in the EU.

· Businesses across Europe face a discouraging burden of red tape - limiting growth and innovation.

· In Denmark, the burden constitutes about 2.2 per cent of GDP.

· If we reduce the costs with 1 billion Euros the effect on economic growth will be 1.4 billion Euros.

· Today, there is a trend to make a distinction between listed and non-listed companies when new initiatives are introduced.

· But there is a danger that this trend will make some listed companies de-list in order to reduce costs. And, as policy-makers, we should be aware of this danger.

The EU and the U.S.

· I therefore welcome the initiative of the European Commission to simplify the rules within the European Union.

· And I support the Commission's review of European company law. It gives us the opportunity to find a fair level of regulation.

· The U.S. authorities have set up a Committee on Smaller Public Companies.

· This Committee will evaluate and make recommendations concerning the rules governing

- internal control,

- corporate governance,

- disclosure,

- and accounting.

· So it seems we are thinking along the same lines on both sides of the Atlantic. And I think the European Union and the United States should co-operate on this particular issue.

· Relieving burdens is by no means an easy task.

· It has certainly been difficult in Denmark. All business organisations have to contribute to the process.

· Naturally, what is viewed as a burden by some could be beneficial to others.

· Even so, in order to move forward we need your support and your knowledge.

· I therefore welcome this dialogue with you business leaders who have joined us today. You have the day-to-day experience with the rules as they stand. Perhaps you have alternative ways of ensuring investor confidence which you could recommend.

Investor Confidence

· To me, investor confidence is about reliable market conditions. Conditions which make investors want to invest.

· But, as we all know, innovation and growth in any company always involve an element of risk. And if we use regulation to avoid any risk, we run the "risk" of creating a barrier to innovation and growth - especially in smaller companies with limited resources.

· In Denmark, a large number of smaller companies are listed. This enables them to attract capital. However, they find increased administrative burdens difficult to cope with.

Danish Priorities

· I would like share with you the factors which I think we should consider when reviewing EU company law in general.

· The Company law action plan includes a number of initiatives.

· And, this Monday, Commissioner McCreevy said that the plan should undergo a review and a renewed consultation.

· According to the Commissioner, initiatives are only to be brought forward if they receive support following a thorough consultation with stakeholders.

· I welcome this approach. However, I wonder if we could go a step further? As previously mentioned, the Commission suggests a revision and possible codification of the entire company law framework in the recently proposed simplification announcement.

· Perhaps it is time to focus on this challenge during the next couple of years and put the initiatives regarding the action plan on hold for a while.

· Only by making such a frank and open-minded evaluation we can set up an effective future company law framework for both the business community and its stakeholders.

· With this in mind I would like to tell you what I believe we should consider when reviewing the EU company law.

Firstly, we should abandon the principle of "one size fits all". One size does not always fit all. Smaller companies should have "smaller" rules.

Secondly, we need better regulation. We need to focus on what is wrong, if anything, with the market before we regulate.

As the saying goes: "If it ain't broke - don't fix it!"

If there are no market faults - or if the market can regulate itself by soft law - we don't need hard law.

Thirdly, we need to enhance transparency in the markets - whenever needed and without placing unjustified burdens on companies. Transparency also applies to the new forms of investors: hedge funds and private equity funds.

One share, one vote

· These are our priorities as we look to the future.

· The challenges ahead are big enough in their own right. And there is no reason to take a step back when we should be moving forward.

· However "One share, one vote" is an issue which continues to attract a lot of attention in the Commission.

· We have discussed this issue before. Frankly, I thought we had moved on. The takeover directive is not supposed to enter into force until May 2006 and yet the Commission wants to re-open this very sensitive issue already.

· I must say that I find that very strange. And I am sure this will not add to the credibility of the EU with the public.

· Nevertheless, let me repeat the position of the Danish government once again. I can assure you that our position has not changed.

· From a Danish and Nordic point of view, multiple voting or dual class shares do not create an obstacle to shareholder democracy. We do not agree that this issue can be described in such simple terms.

· Basically, we do not believe that the system of dual class shares has a negative effect on the market.

· It is my firm belief - that if the market is transparent - investors will know what type of shares they are buying. Again, transparency is key and I think we should leave it to the market to decide if dual class shares are less attractive than other types of shares.

· Having said that, I would also like to stress that I fully agree with the Commissioner that the review of the EU company law is instrumental in achieving the goals set in Lisbon.

Closing

· Let me conclude my speech by expressing my hope that today’s conference can contribute to the debate concerning balancing the future regulation of listed companies.

· I also hope that this conference can enhance the dialogue between Governments, the Commission and companies throughout the European Union and, indeed, even across the Atlantic with our friends in the United States.

· There is a lot at stake here.

· If we fail to find the right level of control, chances are that smaller companies will be unwilling to list.

· Chances are, that they will be unable to gain capital for future innovation and growth.

· And chances are, that some companies will leave Europe and move to those parts of the world offering a more friendly business climate.

· I am not willing to take that chance!

· Thank you for your attention.