ICI Comments on Proposals Regarding European Directors

Washington, DC, August 25, 2004 - The Institute supports draft recommendations recently published by the European (EU) Commission regarding directors' independence and compensation.

Background
The recommendations regarding independent directors are part of a series of initiatives undertaken by the EU Commission to implement the EU's Corporate Governance Action Plan. The EU Commission expects to adopt the recommendations in early fall 2004.

ICI Position
The Institute supports the proposed regulations and commends the EU Commission for revising the recommendations to address several concerns of the investment management industry.

The Institute's comments reflect the experiences of approximately 1,000 U.S. funds that have a global or international focus and its many members managing investment companies and pension funds outside the United States.

Strengthening the Role of Independent Directors
The Institute supports the recommendations made by the EU Commission regarding the responsibilities of independent directors and believes that it will provide directors and companies in the European Union with useful tools to ensure the effectiveness of independent directors. The Institute also supports the EU Commission's approach of making a recommendation to member states and agrees that the recommendation should cover EU-listed companies having their registered office in a member state. However, the Institute also reiterated suggestions it made in an earlier comment letter on this issue. In particular, the Institute encourages the EU Commission to recommend a majority of independent directors on the board and to eliminate an arbitrary criterion for director independence based on the length of a director's tenure.

Regime for Directors' Compensation
The Institute believes that the draft recommendation regarding remuneration of directors would promote an appropriate regulatory framework for directors' compensation, and fully supports the EU Commission's work in this area. However, in its comment letter, the Institute expresses concern that the recommendation no longer invites Member States to implement the recommendation through actual regulations. In addition, the Institute urges the EU Commission to recommend that all the relevant information about the remuneration of directors (including the remuneration policy or significant changes to the policy) be provided in connection with an annual meeting in all EU Member States.

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