Abstract 
This article provides with a critical overview of the latest spate of the European 
Commission’s proposals on reforming corporate governance in the EU. The 
authors argue that most of the proposed measures are simply reactions to recent 
fallouts and new legislation in the US. This article supplies with evidence 
beyond reasonable doubt that the EC’s measures are in fundamental 
disequilibrium with the core and supporting institutions of corporate 
governance in the EU. The paper concludes with a view that rather than 
embarking on a complex exercise in harmonisation, Europe should build on the 
strength of its diversity and imitate the US where it is warranted. 
1.  INTRODUCTION
On 21 May 2003, the European Commission presented its long-awaited 
Communication on enhancing corporate governance and a second 
Communication on reinforcing statutory audit in the EU (European 
Commission, 2003a and 2003b). These Communications follow in the wake of 
the EC-sponsored studies on corporate governance in Europe, the recent 
problems with “America Inc.”, the adoption of the Sarbanes-Oxley Act in the 
United States in July 2002 publication of the High Level Group Report II. 
Together, they recommend a long series of legislative proposals and reforms (20 
in total), and almost as many proposals for recommendations and further studies 
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The Communications’ far-reaching proposals came somewhat as a surprise. 
The corporate governance debate has been going on for over 10 years in Europe 
and flourished at national level. The Commission repeatedly emphasised that 
there was no need to intervene at the EU level as the codes that were set at 
∗
Karel Lannoo is CEPS Chief Executive and head of the financial markets research 
programme. 
*
Arman Khachaturyan is a Ph.D. Fellow at the University of Siena, Italy. Comments 
by Gert-Jan Vossestein are gratefully acknowledged. The paper has also benefited from 
helpful suggestions and comments at the Symposium on the Reform of Corporate 
Governance in Europe and the US at Tilburg University (June 2003). 2676