Action plan timeline.

The European Commission is taking a balanced approach in the use of instruments which are both legislative, referred to as directives, and non-legislative, also known as recommendations, to implement the Action Plan measures. The Action Plan is another name for the corporate governance measures released on May 21, 2003, by the European Union's European Commission. The legislative measures will have to be implemented in the national law of the current 15 and, as of May 2004, the 25 member states of the European Union. Thus, national contract, negligence, securities and civil procedure law will determine the extent of the effect of the measures. Some countries or stock exchanges have similar or even more stringent legislation or listing rules. The importance of the Action Plan (as in any other E.U. regulatory activity) is found in its harmonizing effect.

In summary, the European Commission plans to propose in the short term (2003-2004):

* A directive enhancing corporate governance disclosure requirements and confirming the collective responsibility of board members for key nonfinancial statements, including a Corporate Governance Statement;

* A directive confirming at E.U.-level the collective responsibility of board members for financial statements;

* A directive enabling electronic communication with shareholders and resolving cross-border issues in relation to attendance at meetings, voting in absentia and the right to table resolutions;

* A recommendation strengthening the role of independent nonexecutive and supervisory directors and defining minimum standards for the creation, composition and role of the nomination, remuneration and audit committees;

* A recommendation on the adequate disclosure of particulars of the directors' remuneration to shareholders and investors; and

* The creation of a European Corporate Governance Forum to coordinate the corporate governance efforts of member states.

In the medium term (2005-2008) the European Commission would focus on:

* A directive obliging institutional investors to disclose their general investment policy, as well as their policy with respect to the exercise of voting rights in companies in which they invest;

* A directive granting special investigation rights to shareholders, introducing a wrongful trading rule for directors as well as rules on their disqualification;

* A study on the consequences of the elimination of multiple voting rights and the full implementation of the one vote/one share rule.

With regard to the reform of the audit, the commission plans, in the short term, to modernize the existing directive on the statutory audit and introduce clear principles on public oversight; auditor independence; code of ethics; auditing standards; disciplinary sanctions; and the appointment, dismissal and remuneration of statutory auditors.

The commission also plans to create an E.U. audit regulatory committee, which will assist it in the medium term to study and refine measures for each of the areas mentioned above. Most importantly, the commission has decided to take a close look at the economic impact of auditor liability regimes, although it is not convinced that the harmonization of national liability regimes is either feasible or beneficial to audit quality.