Le Comply or explain : la transparence conformiste en droit des sociétés

The ?comply or explain? mechanism, first employed in the UK, combines voluntary compliance with corporate governance codes and a legal obligation (either by law, regulation or listing rule) to declare compliance with, or, as the case may be, to explain deviations from a code. With the adoption of the directive 2006/46/EC the European Union endorses mandatory ?comply or explain? rules, but has left the member states with a range of implementation options. Unlike many other member states, France has until recently refrained from adopting a legal obligation to ?comply or explain?, and the implementation of the directive into national law was kept to a minimum : First, companies may choose not to apply a code, but instead, confine themselves to a description of their corporate governance practices (however, in such a case they must at least explain their non-application of a code). And where companies do refer to a code, the French law is not clear as to which one. We argue that the weaknesses of the French version of ?comply or explain? only reinforce the weaknesses that we consider to be inherent to any ?comply or explain? regime. In short, we question whether ?comply or explain? can live up to its stated objectives : The mechanism?s first rationale is to promote certain standards that code-drafting bodies deem to represent ?best? practices. Although ?comply or explain? is meant to be flexible (companies, after all, have the choice not to comply), it is not normatively neutral. It is hoped that market participants will exercise pressure on companies to comply with a code, supposedly leading to improved corporate governance. Yet, as economic research indicates, it is uncertain, whether any set of corporate governance standards can stand for ?best? practices in every situation. Pressure to declare compliance with a corporate governance code could lead to a conformist adoption of practices, even where they are not ideal for a particular company in a particular market environment. Secondly, it is put forward that ?comply or explain? facilitates and improves corporate governance transparency. In theory, an interested market participant only needs to analyse the standards of a corporate governance code and, if existent, note individual deviations to receive a concise picture of a company?s corporate governance. We argue, however, that market participants should not rely too much on the information quality of compliance declarations. We show that such declarations contain to large extent interpretable information. Furthermore, the contents of compliance declarations are difficult to verify. Auditor control is limited. Regulatory and penal sanctions for false declarations are available, but there is no systematic control of contents (we address the French legal situation but include comparative references to other EU member states). Content verification could be finally achieved through shareholder litigation. Here, we briefly examine the relevant French law and jurisprudence, also with comparative references. We find that in any legal order, unless it offers far-reaching presumptions favoring shareholder-plaintiffs, proving causality becomes an insurmountable obstacle to a successful damages claim, if the latter is based on nothing else than a misleading or false declaration issued under a ?comply or explain? obligation. What remains, is that ?comply or explain? induces companies to produce a new type of corporate governance information that could improve the dialogue between companies and the investing public. But also in this respect we raise doubts : The pressure to signal compliance with a code, combined with the interpretability of compliance declarations and the limited possibilities to verify their contents, makes corporate governance hyperbole more probable than a fruitful exchange of information. ?Comply or explain? could at best establish corporate governance etiquette, at worst illusive corporate governance transparency.