According to a 2002 study prepared by the international law firm Weil, Gotshal & Manges for the European Commission, the Belgian financial market is characterized by the use of bearer shares, the dominance of small and medium-sized companies, and strong ownership concentration. The corporate governance debate in Belgium centers around the separation between ownership and control, as well as the opposition between the controlling and the minority shareholders, as stated in a 2006 report by Bogaert and Peeters. On December 9, 2004, the Corporate Governance Committee (Committee Lippens) published the Belgian Corporate Governance Code, which is based on the "comply or explain" principle, replacing the 1998 Recommendations on Corporate Governance. Bogaert and Peeters note that the Code, which entered into force on January 1, 2005, has brought significant improvements to the Belgian corporate governance regime. While the Code applies to all Belgian listed companies, it also functions as a reference framework for all other companies. According to the International Monetary Fund's 2006 Financial System Stability Assessment, the Banking, Finance and Insurance Commission intends to review the current system of corporate governance applicable to financial institutions, with the aim of developing a modern framework that will empower financial institutions to put in place their own corporate governance structure. Nevertheless, there is insufficient information publicly available addressing Belgium's compliance with the Organization for Economic Cooperation and Development Principles of Corporate Governance.

General Overview

Capital markets in Belgium are shaped by the dominance of small and medium-sized companies, and strong ownership concentration, according to the International Monetary Fund's (IMF) 2006 Financial System Stability Assessment (FSSA). The corporate governance debate in Belgium therefore centers around the separation between ownership and control, as well as the opposition between controlling and minority shareholders, as stated in a 2006 study by Jan Bogaert and Jan Peeters. One important recommendation of the FSSA relates to the establishment of "an overarching corporate governance framework applicable to the financial sector" (p. 25). Per the same report, the Banking, Finance and Insurance Commission (CBFA) intends to review the current system of corporate governance applicable to financial institutions, with the aim of developing a modern framework that will empower financial institutions to put in place their own corporate governance structure. The new system would also provide the CBFA with adequate enforcement tools. Despite the information provided above, however, there is insufficient information publicly available addressing Belgium's compliance with the Organization for Economic Co-operation and Development (OECD) Principles of Corporate Governance.

According to a 2002 study prepared by the international law firm Weil, Gotshal, and Manges (WGM) for the European Commission, the complexity of the corporate governance system in Belgium is due to the variety of forms that businesses can adopt, ranging from joint stock companies to partnerships with or without limited partners. Public limited liability companies are the most common type of company under Belgian law. Statutory provisions in Belgium only allow for a one-tier board structure. While the board of directors has management and supervisory responsibilities, as stated in the WGM study, in practice, the board often appoints a management committee, thereby recognizing the existence of two-tier boards. The Belgian financial market is also characterized by the use of bearer shares, the dominance of small and medium-sized companies, and strong ownership concentration.

The CBFA was established in 2004 as the integrated supervisory and regulatory authority for the banking, insurance, and securities industry. The CBFA, the Federation of Enterprises in Belgium, and Euronext Brussels have jointly set up a corporate governance committee called Committee Lippens, and they published the Belgian Corporate Governance Code on December 9, 2004. Until 2007, Euronext Brussels was the only regulated stock exchange in Belgium, with a total market capitalization of €232 billion and 227 listed companies. Euronext merged with the NYSE Group on April 4, 2007 to form the first transatlantic stock exchange group, NYSE Euronext. The Corporate Governance Code applies to all Belgian listed companies, but also functions as a reference framework for all other companies. According to a 2006 publication by Bogaert and Peeters, the Code's "comply or explain" approach requires companies to issue a Corporate Governance Charter defining and describing the company's corporate governance policy, and to insert a Chapter on Corporate Governance in the annual report disclosing the application of the Code. Bogaert and Peeters note that the Code has brought significant improvements to the Belgian corporate governance framework through the statutory recognition of dual board structures and advisory committees, the definition of independent directors, the enhanced independence of the statutory auditor, and the registration procedure. Their report focuses on the topic of conflicts of interests, transactions in company stock, market manipulation, insider dealing, and transactions between the company and its board members. The Corporate Governance Code entered into force on January 1, 2005, replacing the 1998 Recommendations on Corporate Governance. On September 21, 2005, the Code Buysse, a new Belgian corporate governance code, was launched, applicable for all non-listed companies. The new code was created at the initiative of the Federation of Enterprises in Belgium, under the presidency of Paul Buysse, by a special Corporate Governance Commission for non-listed companies.

The Committee Lippens organized a public consultation during October and November of 2007 to review listed companies' reactions to the 2004 Code. As noted on the Committee's website, reactions to the Code were, overall, "positive to very positive." The Committee Lippens announced that it would publish a draft version of the amended Corporate Governance Code on its website at the end of June 2008. According to Bogaert and Peeters, the draft will take into account the results of the public consultation. Bold initiatives of the draft include the full disclosure of the remuneration of the board and management committee members and the mandatory appointment of audit, remuneration, and nomination committees.

As noted in the World Bank's 2008 Doing Business report, investor protection in Belgium in 2008 was higher than the average achieved by member states of the OECD. The Investor Protection Index is a subcomponent of the World Bank's 2008 Doing Business Indicators, and consists of three dimensions of investor protection: transparency of transactions (Extent of Disclosure Index), liability for self-dealing (Extent of Director Liability Index) and shareholders' ability to sue officers and directors for misconduct (Ease of Shareholder Suits Index). The indexes range from 0 and 10, with higher values indicating greater disclosure, greater liability of directors, greater powers of shareholders to challenge the transaction, and better investor protection. Belgium scores 8 in the disclosure index, against an OECD average of 6.4. It scores 6 in the Director Liability Index, against an OECD average of 5.1 and 7 in the Shareholder Suits Index against an OECD average of 6.5.

The Principles

Principle I: Ensuring the Basis for an Effective Corporate Governance Framework

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According to the 2006 report by Bogaert and Peeters, the Corporate Governance Code has brought significant improvements to the Belgian corporate governance framework through the statutory recognition of dual board structures and advisory committees, the definition of independent directors, the enhanced independence of the statutory auditor, and the registration procedure. The Code entered into force on January 1, 2005, replacing the 1998 Recommendations on Corporate Governance. In its 2006 FSSA, the IMF recommends establishing "an overarching corporate governance framework applicable to the financial sector" (p. 25). The IMF report notes that the CBFA intended to review the current system of corporate governance applicable to financial institutions, with the aim of developing a modern framework that will empower financial institutions to put in place their own corporate governance structure. The new system would also provide the CBFA with adequate enforcement tools. However, the available sources do not directly address Belgium's compliance with this principle.

Principle II: The Rights of Shareholders and Key Ownership Function

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According to the 2006 report by Bogaert and Peeters, the Corporate Governance Code has brought significant improvements to the Belgian corporate governance framework through the statutory recognition of dual board structures and advisory committees, the definition of independent directors, the enhanced independence of the statutory auditor, and the registration procedure. The Code entered into force on January 1, 2005, replacing the 1998 Recommendations on Corporate Governance. In its 2006 FSSA, the IMF recommends establishing "an overarching corporate governance framework applicable to the financial sector" (p. 25). The IMF report notes that the CBFA intended to review the current system of corporate governance applicable to financial institutions, with the aim of developing a modern framework that will empower financial institutions to put in place their own corporate governance structure. The new system would also provide the CBFA with adequate enforcement tools. However, the available sources do not directly address Belgium's compliance with this principle.

Principle III: The Equitable Treatment of Shareholders

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In the context of strong ownership concentration, the corporate governance debate in Belgium centers around the separation between ownership and control, as well as the opposition between the controlling and the minority shareholders, according to the 2006 Bogaert and Peeters report. The 2007 study by the international law firm of Allen and Overy adds that, on May 23, 2007, the EU Takeover Directive No. 2004/25/EC was fully transposed into Belgian law by the 2007 Law on Public Takeovers, and the 2007 Royal Decree on Public Takeovers. The new legislation was expected to enter into force on September 1, 2007. Nevertheless, there is insufficient information publicly available addressing Belgium's compliance with this principle.

Principle IV: The Role of Stakeholders in Corporate Governance

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There is insufficient information publicly available addressing Belgium's compliance with this Principle.

Principle V: Disclosure and Transparency

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Disclosure remains unsatisfactory in comparison to the European average, as noted in a 2005 study by Heidrick and Struggles. For instance, there is no requirement to publicly disclose compensation of individual directors. Per the same report, improved disclosure in areas such as length of tenure, other board positions, company share ownership, and compensation would enable a better assessment of the true independence of directors. In their 2006 report, Bogaert and Peeters note that, to ensure disclosure of corporate governance practices, the Corporate Governance Code's "comply or explain" approach requires companies to issue a Corporate Governance Charter, as well as list a Corporate Governance Chapter in the annual report. The Code further advises to fully disclose the company's remuneration policy, as well as remuneration of directors. As noted in the IMF's 2006 FSSA, "the CBFA sets and enforces detailed prospectus and on-going disclosure requirements" (p. 48). However, the use of bearer shares may affect the dissemination of disclosure information, undermining the rights of investors. The IMF report recommends giving more powers to the CBFA to impose material event disclosure requirements upon unlisted companies. Furthermore, while transaction reporting requirements for large shareholders are in place, the IMF advises making them public and extending the requirements to directors and related parties. The EU Transparency Directive No. 2004/109/EC was fully transposed into Belgian law by the 2007 Law on the Notification of Important Shareholdings. According to a 2008 article by Silvia Van Dyck and Heike Ramaut of the business law firm Laga, the Law sets forth new transparency requirements in case of the acquisition or disposal of important shareholdings in undertakings whose shares are admitted to trading on a regulated market. The Law also introduces changes in notification requirements, and modifies the supervisory role of the CBFA. Nevertheless, there is insufficient information publicly available addressing Belgium's compliance with this principle.

The Deloitte & Touche IAS Plus website notes in a September 2005 update that, as of that year, Belgian companies listed in a European Union and/or European Economic Area securities market are required to prepare their consolidated financial statements in accordance with International Financial Reporting Standards. Moreover, according to the IMF's 2006 FSSA, "accounting and auditing standards are of an internationally acceptable quality" (p. 48).

Principle VI: The Responsibilities of the Board

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According to the 2006 report by Bogaert and Peeters, statutory provisions in Belgium only allow for a one-tier board structure. While the board of directors has management and supervisory responsibilities, the 2002 WGM study notes that, in practice, the board often appoints a management committee, thereby effectively creating two-tier boards. The WGM study adds that, in 2000, the Directors Foundation - an association of Belgian corporate directors - issued the Director's Charter to provide best-practice principles for its members. Compliance with the Charter is wholly voluntary. The 2004 Corporate Governance Code has brought significant improvements to the Belgian corporate governance framework through the statutory recognition of dual board structures and advisory committees, the definition of independent directors, the enhanced independence of the statutory auditor, and the registration procedure. The Committee Lippens announced that it would publish a draft version of the amended Corporate Governance Code on its website at the end of June 2008. Bogaert and Peeters reported in 2007 that bold initiatives of the draft include the full disclosure of the remuneration of the board and management committee members, and the mandatory appointment of audit, remuneration, and nomination committees. However, the publicly available information does not directly address Belgium's compliance with this principle.