15 October 2019

ESMA Chair Steven Maijoor speech on the quality of corporate governance

Mr Maijoor said: „The role of corporate governance to attract retail investors to the financial markets can then also not be underestimated. Corporate governance is like democracy: it should not only be applied it should also be seen to be applied. People will only trust their money to someone if they trust the person taking care of it. It is impossible to develop a long-term financial centre without trustworthy operators.

Good corporate governance rests upon people. A strong code is then also helpful to understand what is expected, to align the interests of the different parties and to overcome the often-existing information asymmetry. But a code or a charter that is not lived up to, that is not implemented in practice remains a promise and empty words.

For supervisors respecting corporate governance arrangements is then also key. Does the entity have the right company culture with a focus on the right people doing the right things? This goes far beyond listed companies and whether management is working in the interest of the company and its shareholders. This is also relevant in the area of MIFID when we talk about selling products or more particularly in relation to checking whether directors are capable of taking decisions that ensure the sound and prudent management of their investment firm by being fit and proper. Also for ESMA as a direct supervisor strong governance with the high-quality people and clearly set processes is extremely important. For example, in the credit rating agencies business after what we learned through the financial crisis eliminating conflicts of interests remains crucial for ESMA. In that respect we have issues a fine of more than 5 million euro earlier this year against the Fitch group for breaching the conflict of interest provisions.

While we, regulators with a mandate regarding financial markets, are not able to address the main drivers of climate change directly, we do need to ensure that all risks of assets are taken into account and that financial markets respond to the (changing) preferences of investors. Supervisors will then also focus more and more on the relevant disclosure, transparency, conduct and governance frameworks to consider the sustainability risks of assets. This will allow an increasing number of investors assess the sustainability impact of assets when making an investment decision.“

Full speech on ESMA

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