Transparency of Politics. The Role of Corporate Lobbying in Accounting Standard Setting

Table of Contents

List of Figures

List of Tables

List of Abbreviations

1 Introduction

2 The Role of the European Parliament
2.1 In the Ordinary Legislative Procedure
2.2 In the IFRS Endorsement Process

3 The Relationship between Corporate Lobbyism and Transparency
3.1 Corporate Lobbyism in the Context of the EU
3.2 Transparency of the EP (and how it relates to Lobbyism)
3.3 Transparency in Practice - Tracing MEPs’ Business Group Contacts

4 What the Literature knows about Lobbyism in the EP
4.1 Literature Scope, Limitations, and the Measurement of Influence
4.2 Factors to Consider when Investigating Lobbyism in the EP
4.3 Characteristics of Corporate Lobbyism in the EP
4.4 Lobbyism in other relevant Bodies in the Endorsement Process

5 Thesis Summary

References

Appendix

List of Figures

Figure 1: The Ordinary Legislative Procedure (OLP)

Figure 2: The IFRS Endorsement Process

Figure 3: The Internal Organization of the European Parliament

Figure 4: Inside the European Parliament: The Committee Process

List of Tables

Table 1: The Measurement oflnterest Group Influence (1/3)

Table 2: The Measurement oflnterest Group Influence (2/3)

Table 3: The Measurement oflnterest Group Influence (3/3)

List of Abbreviations

Abbildung in dieser Leseprobe nicht enthalten

1 Introduction

In March 2022, when the European Commission (EC) proposed including nuclear and gas activities in its taxonomy for sustainable activities, it aroused considerable public attention. Although key decision-makers of the European Parliament (EP) intended to object to the EC’s proposal formally, the EP’s plenary did not follow their guidance. In fact, 278 of 705 Members of the European Parliament (MEPs) voted in favor of the objection, and 33 further MEPs abstained¹. As of today, it is unknown which role business interests played in the decision of the EP not to oppose the proposal. What is known, though, is their omnipresence at the EU level. Today, the Transparency Register of the EU records 12,687 registered lobbyists that have access to the key institutions of the EU².

This paper examines the transparency of the EP, the directly elected EU institution supposed to be closest to EU citizens. It does so by focusing on the role that business interests play in the decision-making as regards accounting regulation. Accounting regulation, thereby, refers to the endorsement of IFRS by the EU as well as transparency regulations like the EU taxonomy. Both related areas have substantial economic consequences as they “have the potential to re-allocate economic resources” (Bischof & Daske, 2016, p. 49). As such, they are highly relevant policy areas for corporate lobbyists.

The paper proceeds as follows. Section 2 provides an overview of the relevant leg­islative procedures at the EU level and examines the EP's legislative influence, gauging its attractiveness for business interests. Section 3 then introduces the concepts of lobbying, transparency, and how both are interrelated. It thereby examines the EP's transparency regarding the availability of information and demonstrates how to trace contacts between MEPs and corporate lobbyists. Section 4 finally narrows down the discussion to lobbyism within the EP, providing a holistic discussion of the contemporary literature. Section 5 concludes.

2 The Role of the European Parliament

This section sheds light on the EP’s relevance in the decision-making process of the EU that defines its importance to lobbying interests. It adopts an institutional perspective, mostly treating the EP as a ‘black-box’ entity. Section 4.3 extends the discussion to processes within the EP.

2.1 In the Ordinary Legislative Procedure

The ordinary legislative procedure (OLP, TFEU Art. 289 (1)) is the default legislative procedure for decision-making in the EU³. Formerly known as Co-deci- sion, it puts EP and Council on an equal footing, approaching a bicameral system (Kluger Dionigi, 2017, p. 45). The OLP is pertinent to accounting regulation - it was applied in 2020 when the EP and Council agreed on the EU taxonomy (Regulation (EU) 2020/852). The EU taxonomy is a standard science-based classi­fication for sustainable activities, as examined by the think tank InfluenceMap⁴ (2020). It will serve throughout this paper as a case study of lobbyism directed at accounting regulation.

When the Lisbon Treaty introduced the OLP in 2009, the EP rose to a genuine co-legislator with the Council of the EU (Council). This move was a pars pro toto of treaty changes that gradually empowered the EP (European Parliament, 2022, p. 3). Figure 1 illustrates the OLP initiated by the European Commission (EC), the executive branch of the EU, by adopting a policy proposal⁵ (Kluver, 2013, p. 178). The OLP includes three reading stages that differ, among others, in required majorities and the scope of possible amendments. Notably, at the first reading, a lower majority suffices to approve, reject, or amend proposals than at the second reading (Kluger Dionigi, 2017, p. 30f). Irrespective of the formal requirements, the EP has substantial influence over the decision-making process as it can reject a proposal at any stage of the OLP. The EP’s empowerment reflects in increasing support for its amendments by the EC and the Council (Rasmussen, 2015, p. 366).

Furthermore, the OLP is shaped by the predominance of informal trilogues “used in 70 to 80% of the legislative procedures” (General Court of the EU, 2018). The EP engages in inter-institutional negotiations with the Council and EC that can take place before the first reading, as indicated in Figure l⁶. The three EU institutions reconcile their policy positions and usually adopt legislation at an early stage, rendering late OLP stages negligible (European Parliament, 2020, p. 26). Trilogues can start once all participants obtain a mandate to negotiate. In the case of the EP, the respective committee must adopt a legislative report by the majority of its members (Rules of Procedure (RoP) 71). The Committee for Economic and Monetary Affairs (ECON) is responsible for legislation in the context of accounting regulation. The EP overall has 29 committees⁷ focused on different policy areas. They are the “legislative backbone of the EP” (Kluger Dionigi, 2017, p. 26), drafting amendments and determining the EP’s legislative position ahead of the discussion in plenary.

Insights into the OLP corroborate the legislative weight of the EP. It was, however, noticeably constrained when the EC issued a delegated act to include gas and nuclear activities in the EU taxonomy⁸ (Regulation (EU) 2022/1214). Although two responsible committees, including the ECON, objected to the delegated act⁹, the EP plenary subsequently failed to reach the necessary absolute majority to adopt the objection.

2.2 In the IFRS Endorsement Process

The former member states’ prerogative of accounting standard-setting promptly faded when the EU introduced IFRS to consolidated financial statements of publicly listed companies (Regulation 1606/2002 (IAS Regulation)). For IFRS are issued by the IASB - a foreign private body - the EU decided to endorse IFRS on behalf of its member states, retaining the formal influence on standard setting and ensuring its democratic legitimization (Crawford et al., 2014, pp. 306-313). The EU generally can chose not to endorse IFRS fully or partially (carve-outs)¹⁰. These, however, result in ‘EUIFRS’ being a subset of‘full IFRS.’ Formally, the legislative procedure pertinent to the endorsement of IFRS is the Regulatory Procedure with Scrutiny (RPS), a ‘pre-Lisbon’ procedure exclusively applied to the accounting area¹¹ (European Parliament, 2016, pp. 3-5). IFRS must fulfill three cumulative criteria to be eligible for endorsement¹². Criteria vagueness thereby endows the EU institutions with endorsement discretion (Bischof & Daske, 2016, p. 9).

Figure 2 illustrates the endorsement process. It shows how two European bodies, the EFRAG and the ARC, are consulted before an endorsement proposal reaches the EP¹³. Historically until this point, the EP had no issue exposure. But as with its empowerment in the OLP, the EC emphasized the crucial role of EP scrutiny in the endorsement process. The EP’s active participation is also imperative because the Council¹⁴ tends to endorse IFRS without objection (Chiapello & Medjad, 2009, p. 464; Walton, 2020, pp. 308-309). Its right of scrutiny allows the EP to block the endorsement proposal if it exceeds the EC’s implementing powers - irrespective of a prior ARC approval. Also, the EP can require the EC to conduct an impact assess­ment (Crawford et al., 2014, pp. 313-314). However, the EP has less power in the endorsement process than in the OLP. First, it requires an absolute majority to oppose an endorsement as opposed to a simple majority in the OLP’s first reading. Second, it is the EC that adopts the legislation, not the EP.

The benefit of lobbying the EP as regards the endorsement of IFRS also hinges on the ‘upstream’ influence the EU can exert on the IASB. Bischof and Daske (2016, pp. 7-9) discuss factors that moderate the EU’s position vis-a-vis the IASB. On the one hand, it is strengthened by the criteria vagueness and the lack of a ‘tick-box’ approach preventing the IASB from marginally adapting. On the other hand, however, the EU is in a strategic dilemma. Any deviation from ‘full IFRS’ feeds on financial statements’ consistency and imposes additional costs on European businesses. The possibility of carve-ins increases the EU’s ability to influence the IASB (European Commission, 2018, p. 3). Eventually, to credibly threaten not to endorse IFRS is a decision of weighing cost and benefits (Bischof & Daske, 2016, pp. 51-53) that business groups have strong incentives to influence.

3 The Relationship between Corporate Lobbyism and Transparency

The previous section demonstrated that the EP, promoted by the Lisbon Treaty (2009), is a genuine co-legislator and an important lobbying venue. This section continues by introducing the foundations of corporate lobbyism in the EU. Moreover, it investigates the transparency of the EP.

3.1 Corporate Lobbyism in the Context of the EU

According to a recent EU notion, lobbyism embodies “activities carried out by interest representatives with the objective of influencing the formulation or imple­mentation of policy or legislation” (EuropeanUnion, 2021, Art. 3). While examples of lobbying activities are manifold, ranging from private meetings to open comment letters, all revolve around a central objective - the exertion of influence. Influence has been studied extensively in political science; Section 4.1 shows how scholars approach the measurement of lobbyists’ influence on the EP. It can be categorized into four channels. Besides ‘inside lobbying’ involving direct contacts with decision-makers, it can also be exerted through ‘outside lobbying’ (e.g., protests), the selection of decision-makers, or structural power¹⁵ (Kluger Dionigi, 2017, p. 62). Irrespective of private interests, there is raison d’etre for lobbyism in the political arena. Lobbyism fosters the inclusiveness of political institutions, being “closely related to the freedom of speech and the right of petition to government” (Transparency International EU, 2021, p. 31). In addition to the ‘inclusion function,’ lobbyism in the EU also serves an ‘information-provision function.’ The provision of private information enables decision-makers to develop effective policies efficiently. It is a prerequisite of a functioning system, particularly in light ofMEPs’ resource constraints (Walton, 2020, p. 1).

At the time of writing, there are 12,687 registered lobbyists, of which 3,042 are individual companies, 2,712 are business associations, 994 are labor unions, and 568 are specialized consultancies¹⁶. These figures aptly express the significance and face of corporate lobbyism at the level of the EU. Thereby, collective industry associations allow for cost-sharing by individual business interests (Walton, 2020, p. 312). The Bundesverband der Deutschen Industrie e.V. (BDI), for instance, is a German industry association employing 28 FTE lobbyists and spending more than 3 million EUR on lobbying per year¹⁷. Other lobbying actors particularly relevant to accounting regulation are large audit firms. These companies, in essence, the Big 4, are mainly involved at the upstream level. They have dedicated IFRS departments (‘IFRS desks’), review draft standards, and influence the agenda­setting stage (Monsen, 2022, p. 1). All mentioned actors are henceforth referred to as businesses. The scope of topics business interests can address in the context of accounting regulation is broad. Frankly, “what is a profit or loss is a convention, not a fact” (Chiapello & Medjad, 2009, p. 449). Businesses lobby standards’ con­tent, application scope, and the enforcement system. In less salient cases, they aim to reduce the costs resulting from changes in accounting regulations¹⁸. There are, however, also more salient cases when businesses’ objective is to avoid a deterio­rated appearance of their financial statements impairing their market valuation (Walton, 2020, p. 303-305). More general, lobbyists attempt to influence the policy outcome, in most cases, the EP committee report or the plenary outcome at the first or second reading (Kluger Dionigi, 2017, p. 3). As regards the EU taxonomy, InfluenceMap (2020, pp. 2-4) identified a plethora of businesses lobbying for a relaxation of sustainability criteria imposed on their sector. COPA-COGECA, the strongest agriculture association in the EU, accomplished removing GHG emission benchmarks from the EC’s proposal.

3.2 Transparency of the EP (and how it relates to Lobbyism)

Transparency of the EP refers to the ability of the public to access information about the legislative process, including information on legislative bargaining, voting results in committees or the plenary, and MEPs meetings with lobbyists (Font & Perez-Duran, 2022, p. 3). Thereby, decision-making transparency has two distinct functions. Its ‘accountability function’ denotes its role in enabling public scrutiny. Scrutinizing MEPs happens ex post and, thus, requires the availability of infor­mation after the closure of the legislative process. In contrast, its ‘participation function’ hinges on the availability of information ex ante. Only then can lobbyists and other stakeholders contribute to decision-making (Brandsma, 2019, p. 1468). An important implication of transparency lies in its relation to lobbyism. Transpar­ent lobbyism includes formal activities like submitting position papers as well as private but disclosed meetings with MEPs. On the contrary, opaque lobbyism (‘behind closed doors’) can range from unrecorded telephone calls to frequent con­tacts in the informal political sphere (Kluger Dionigi, 2017, p. 22). This distinction is critical for research into lobbying of the EP, primarily since “the most successful intervention could be defined as that which is not visible” (Walton, 2020, p. 310).

Institutional openness and transparency are guiding principles of the EU¹⁹ (TFEU Art. 15 (1-3)) and, as such, codified in the EP’s RoP and its members' Code of Conduct. The latter, though, was criticized by Transparency International EU (2021, p. 5) for several issues like the lack of a cooling-off period that sustains the EP’s revolving-door problem or the opacity as regards the sanctioning of miscon­ducts. In April 2021, the EU institutions agreed to introduce a common mandatory Transparency Register (TR), answering longstanding calls from MEPs and NGOs (European Union, 2021). As the predecessor of the mandatory TR was voluntary, the step substantially enhanced the EP’s transparency. The TR, from now on, records contact details, lobbying information, and financials of all interests that seek influence in accordance with the EU’s notion of relevant lobbyism²⁰ (Section 3.1). The TR registration is a precondition for lobbyists to be granted long-term access to the EP premise and to speak at committee hearings (RoP 123(1)). MEPs, however, are only expected - not obliged - to meet registered lobbyists exclusively (RoP 11(2)). Section 2.1 introduced informal trilogues used to adopt legislation at an early stage. The facilitation of the decision-making process, however, comes at the expense of its transparency. Neither are trilogues publicly announced nor are meeting documents made pro-actively available. Hence, trilogues are like a “black­box” between the EC’s proposal and the committee report presented to the plenary²¹ (Brandsma, 2019, pp. 1469-1471). The EP’s RoP stipulate that the negotiators must “report back to the next meeting of the committee responsible” (RoP 74(3)). Examining these committee meetings that are publicly web-streamed, Brandsma (2019, pp. 1474-1478) finds that trilogue negotiators’ feedback to committees was inadequate in quality, quantity, and timeliness. As regards the ECON, feedback “is done very quickly and little detail is provided, with no room for interventions by members” (Brandsma, 2019, p. 1474f). Another valuable information source about trilogues is the four-column tables that record the three institutions’ positions and the compromise proposal (European Parliament, 2020, p. 29). The EP publishes the documents after the legislative procedure's closure through the parliamentary documents register²². Also, EU citizens can always petition access to documents on ongoing legislature²³ (Transparency International EU, 2021, pp. 20-26).

A crucial contribution to the transparency of the EP are disclosures by MEPs. Since a revision of its RoP in 2019, MEPs in special institutional roles (later ‘key MEPs’) are obliged to publish contacts with interest representatives that they have in the context of their roles (RoP 11(3)). There is no comparable obligation for other MEPs. Notably, according to data collected by Font and Perez-Duran (2022, p. 8), merely 53% of MEPs published meetings between 2019 and 2021. Despite the EPs’ evident willingness to enhance transparency, its current organization concedes ample scope for hidden activities to lobbyists. The findings in this section corrobo­rate that lobbying ‘behind closed doors’ must be accounted for by the literature dealing with lobbyism (Section 4.1). Section 3.3 extends on the above discussion.

It presents viable data sources and methods enabling researchers to trace meetings between MEPs and business groups.

3.3 Transparency in Practice - Tracing MEPs’ Business Group Contacts

The EU institutions currently provide neither centralized nor machine-readable data (Transparency International EU, 2021, p. 6). First, the website of the EP is a pragmatic starting point for tracing industry contacts of MEPs²⁴. With the latest revision of its RoP, the EP implemented an IT system that MEPs can use to disclose meetings. They publish the date, type, subject of the meeting, whom they met, and their institutional role²⁵ (Transparency Register Management Board, 2021, p. 7). Second, the mandatory TR can serve as a sampling framework for business groups employed by Ibenskas and Bunea (2021). Particularly conducive to contact tracing are findings about business groups’ participation in EP intergroups²⁶, the names of lobbyists accredited for EP access, and business groups’ fields of interest. Unfortunately, MEPs’ disclosures and the TR are not yet interconnected. Adopting the interinstitutional agreement on the mandatory TR²⁷, The European Parliament (2021, 19(a)) called for the implementation of a direct link between both sources in a “publication tool [that is] fully user-friendly and searchable.” Hence, in the meantime, providers that aggregate information from the TR and MEPs are useful expedients for researchers. Two prominent examples are Integrity Watch EU and LobbyFacts. Integrity Watch EU, a database provided by Transparency International EU, collects and harmonizes scattered data retrieved from EU web­sites. Its data, available for download, can easily be filtered for it is built on Tableau. For instance, filtering for ‘taxonomy,’ there are 115 recorded meetings with 35 MEPs, the majority of which (11) are members of the ECON²⁸. LobbyFacts is an evenly helpful tool for researchers. It provides extensive information about lobby organizations drawn from the TR and the EC’s website. A substantial upside of LobbyFacts is that it stores historical data no longer available in the respective registers²⁹. Furthermore, Ibenskas and Bunea (2021) pioneered an alternative and promising method for contact tracing. The authors use social media data to trace contacts between MEPs and registered lobbyists. Specifically, they examined the patterns of lobby organizations following MEPs on Twitter and vice versa, collecting a total of 4 million observations over 7,000 organizations.

4 What the Literature knows about Lobbyism in the EP

This section delves deep into the contemporary knowledge about business interests that lobby (accounting regulation) in the EP. After briefly addressing the frequency and influence of lobbyism, it provides a detailed meta-level account of pertinent literature. The section then extends on Section 3.1 - which depicts who lobbies for corporate interests, about what, and why - examining who, when, and how business lobbyists attempt to influence the EP.

Reports about the frequency of lobbyism in the EP are entirely anecdotic. Con­sidering the EU taxonomy, for instance, InfluenceMap (2020, p. 9) identified 31 disclosed meetings between MEPs and business groups³⁰. The Integrity Watch EU database contains 27,054 records of meetings between MEPs and interest groups, which, based on 705 MEPs and the three years of data, approximates an average of one meeting per MEP per month³¹. Ibenskas and Bunea (2021, p. 569) recognized 15,164 cases of MEPs following registered lobbyists on Twitter (a median of 13.5 per MEP), 51% of which were reciprocated. Without benchmarks, these findings provide little insight. Nevertheless, it is accepted that the EP’s empowerment (Section 2.1) increased the frequency oflobbying (Rasmussen, 2015, p. 365).

Insights into lobbying influence on the endorsement process are very scarce. Crawford et al. (2014) examined the case of IFRS 8 Segment Reporting that was heavily lobbied - to a large extent by NGOs, however. Also, there is no systematic evidence of the impact of the Big 4 on accounting regulation in the EU, as Monsen (2022) provides for the U.S. context. Eventually, as is often the case, the answer to the question is that it depends. Business groups’ influence on policy outcomes is contingent on factors studied in Section 4.2.

4.1 Literature Scope, Limitations, and the Measurement oflnfluence

Lobbyism is a traditional focus area of political science, suggesting why research has paid little attention to the context of accounting regulation. Also, the EP, long conceived as a “lobbying sideshow” (Kluger Dionigi, 2017, p. 2), was no key area of interest. As the research attention increased during the last decade, however, findings about the different steps of the lobbying process in the EP are well- established³². Yet, the study of existing literature evenly shows that academia does not holistically cover business lobbying in the EP. It appears that research questions are frequently invoked for individual studies but not taken up by subsequent research. Some reports only mean to inform political actors (Walton, 2020, p. 304), while syntheses of findings, as in Marshall (2010, p. 555), are rare. Thereby, the literature is either based on anecdotic evidence, including the authors’ own experiences³³, or (semi-)structured interviews of EP lobbyists, MEPs, or EP staff exposed to lobbyism³⁴. These research designs are contingent on the myriad of methodological and analytical problems that the literature about lobbyism encounters. Methodologically, literature is constrained by the restricted access to relevant decision-making documents, for instance about trilogues, and the fraction of unobservable lobbyism as long as ‘hidden’ lobbyism cannot be ruled out (Section 3.2). Also, in most cases, lobbyism lacks a unit of measurement and cannot be ranked (Dur, 2008, p. 560). Analytically, dealing with incomplete and heterogenous disclosures by MEPs is a major concern. As long as meeting disclosures are not compulsory for all MEPs, it is expectable that MEPs systematically avoid providing information about controversial meetings³⁵ (Font & Perez-Duran, 2022, p. 3). Another analytical problem is the bias inherent to self-reported data in interviews and surveys. Interviewees may intentionally or by mistake misrepresent the circum­stances. For instance, business groups might exaggerate influence, signaling success to their members, or downplay influence by avoiding public protest³⁶ (Dur, 2008, p. 563). Moreover, various confounding factors, such as counter-lobbying, make it particularly challenging to establish causality in the context of lobbyism. Evidently, ‘avoiding worse’ in contests with opposing interests constitutes success but is difficult to identify (Kluger Dionigi, 2017, p. 63f).

Anecdotic influence is relatively easy to grasp. Notably, “it is not unusual to see MEPs from different political groups suggest identical amendments with identical justifications” (Kluger Dionigi, 2017, p. 30). However, in view of the limitations discussed above, it requires prudent approaches to measuring influence in ways that enable the establishment of a causal connection between lobbyism and policy out­comes. Tables 1 to 3 provide an extensive and structured overview of the methods currently used in the literature. The most frequently used approach is process tracing. Researchers thereby attempt to identify causality between policy outcomes and the process steps of specific lobbying cases³⁷. However, while researchers acquire substantial knowledge of the cases under review, small sample sizes prevent the generalization of findings (Dur, 2008, pp. 562-567). Another approach, the degree of preference attainment, analyzes how interest groups’ policy preferences relate to deviations of adopted legislative acts from consultation drafts. Utilizing computerized text analysis, it can be applied to larger data sets and is generalizable. The process that led to the outcome, though, is largely ignored, prohibiting any conclusions about causality (Kluver, 2013, p. 72f). An obstacle both process tracing and preference attainment have in common is the reliance on the empirical measurement of policy preferences (Kluger Dionigi, 2017, p. 63f). While textual data is ample and easily accessible (Bischof et al., 2020, p. 593), traditional hand­coding of large data sets is time consuming and prohibitively costly (Monsen, 2022, p. 16). Kluver (2013, pp. 68-71) therefore proposes the use of computer-based text analysis techniques, already established in the research of party positions - Wordfish and Wordscores (see Table 3). In the U.S. context, Monsen (2022, p. 15f) employs Wordscores to identify the policy positions of the Big 4 based on the tone they apply in submitted comment letters. Measuring policy preferences is a lesser concern when analyzing the perceived influence of lobbyists. This third approach is based on surveys of peers, experts, or interest groups and is prone to biases of self-reported data discussed before (Kluver, 2013, p. 61). Eventually, all methods have specific pros and cons. Dur (2008, p. 569f) therefore recommends a triangu­lation of the methods, providing the methods’ benefits while mitigating their weaknesses³⁸.

4.2 Factors to Consider when Investigating Lobbyism in the EP

This sub-section summarizes factors that provide subsequent empirical research with relevant insights (for instance, into potential control or explanatory variables). First, it is important to acknowledge that antecedents of lobbying and the moderators of its impact are very difficult to distinguish. Intuitively, there is simul­taneity as business groups become active where they expect to be influential. Vice versa, they abandon specific lobbying activities that do not pay off³⁹.

The IFRS endorsement process (Figure 2) allows business interests to lobby accounting standards actively. Walton (2020, p. 306) argues that the complexity of the process creates various contact points for lobbyists within and beyond the EP. Accordingly, the vagueness of the endorsement criteria not only empowers the EP vis-a-vis the IASB (Section 2.2) but also creates room for interpretation that business interests can use (Bischof & Daske, 2016, p. 9). There is only so much literature about clear antecedents of lobbyism. An exception is a study by Ibenskas and Bunea (2021) based on data retrieved from social media (Section 3.3). They found that MEPs are more likely to recognize incentive groups when it is conducive to their re-election and policy influence. Also, they show that member state affiliation, ideological proximity, and interest group prominence are relevant factors (Ibenskas & Bunea, 2021, pp. 561-565). Further lobbying antecedents like the concentration of power and availability of contact points are presented in the context of the EP in Section 4.3.

Section 3 has shown that a key moderator of certain businesses’ influence is the transparency of the political process itself. Those interests that find it more difficult to gain support in the public domain expectably benefit from the presence of hidden lobbyism. Generally, knowledge about the moderators is well-established as the study of influence factors is common in political science. First, business interests are more influential when issues receive little attention from average voters. Vice versa, it is difficult for businesses to influence decision-making in politicized areas. The finding is sensible since ‘quiet’ policy areas are less likely to be lobbied by other (non-)business interests (Kluger Dionigi, 2017, p. 42), and MEPs have weaker incentives to oppose business interests on policy issues that voters do not recog­nize⁴⁰ (Rasmussen, 2015, p. 369). Second, business influence is more potent when issues are highly technical, increasing decision-makers' dependence on outside information. Businesses stand by to provide information to MEPs who generally have limited time and staff resources (Bouwen, 2004, p. 476). Topics in the context of accounting regulation typically are highly technical and have little relevance for the average voter. It is hence expectable that the policy area of accounting is particularly susceptible to business interests. Other important factors moderating business interests’ influence are specific to the EU. State heterogeneity, for instance, reduces the influence of labor unions due to fragmented welfare state provisions (Walton, 2020, p. 307). Besides, the ex-post evaluation system of EU legislation - that is, the review of existing legislation all three to five years - requires business groups to foster long-term relationships with MEPs. Also, it means that existing regulations can only be influenced marginally (Kluger Dionigi, 2017, p. 20f).

4.3 Characteristics of Corporate Lobbyism in the EP

This section complements the account of lobbyism in Section 3.1 by narrowing the discussion down to the EP’s inter-organizational structures. That is, it investigates which individuals and platforms business lobbyists usually address, when they become active, and which strategies they pursue.

Figure 3 illustrates the internal organization of the EP. Although the plenary even­tually adopts legislation, the committees define the EP’s position ahead of the first reading. Even more, the trend towards early agreements (trilogues, see Section 2.1) diminished the role of the plenary vis-a-vis the committees. Frequently, the internal agreements are already in place once the plenary gets involved (Marshall, 2010, p. 555). Consequently, the primary lobbying target of lobbyists in the EP is the com­mittees⁴¹. Registered lobbyists generally have easy access to the committees as they are expected to meet in public⁴² (RoP 121(3)). Also, committee hearings are a common platform for dialogue and information exchange between MEPs and lobbyists⁴³ (Kluver, 2013, p. 181). Within the committees, power is again concen­trated on a group of ‘key MEPs’, namely the (shadow) rapporteurs and committee chairs. Figure 3 includes a summary of their respective roles. Decisively, the key MEPs have substantial sway over the decision-making process, holding agenda­setting power and representing the EP in trilogues (Font & Perez-Duran, 2022, p. 4). Furthermore, the EP’s intergroups are popular lobbying platforms for informal exchanges between business groups, MEPs, and assistants. Membership in the intergroups is open to registered businesses that can “target a whole group [of decision-makers] with their arguments at once” (Bouwen, 2004, p. 484). Currently, however, there are no intergroups focusing on accounting regulation⁴⁴. The admini­strative venue is another target of business interests in the EU. Rasmussen (2015, p. 369) describes that business groups that were unsuccessful in the legislative arena pursue the strategy of shifting venue. This strategy is in line with the findings of Transparency International (EU, 2021, p. 26) that “some MEPs are happy to leave the bulk of negotiations to (...) Committee Secretariat representatives”.

There is broad agreement that business groups have more impact the earlier they engage in lobbying (Kluver, 2013, p. 201). First, since most requirements become stricter, the influence potential decreases in the order of readings in the OLP (Figure 1). Secondly, business groups have a broader scope to influence new proposals than reviewed legislation (Section 4.2). Figure 4 provides an overview of lobbying at the different stages of the committee process at all of which business groups are active, lb submitting position papers or sending out voting lists (Kluger Dionigi, 2017, p. 28f). Marshall (2010, pp. 559-562) presents an integrative model of who is being lobbied at which stage of readings in the EP. The author shows that business groups’ lobbying is a function of the committee phase, the MEP’s influence, and the lobbyist’s ideological closeness with the respective MEP. The model, accordingly, predicts that business groups lobby rapporteurs irrespectively of their closeness due to the weight of early intervention. At later stages, business groups will only lobby influential ‘friends.’

As pertains to the question of how lobbying occurs in the EP, it lastly is sensible to emphasize the difference between short-term and long-term lobbying. Short-term lobbying is directed at specific dossiers. It mostly revolves around the inclusion or exclusion of amendments in the committee report. On the contrary, long-term lobbying attempts to create a reputation of trustworthiness and nurture key contacts. A precondition of long-term lobbying is the physical presence in Brussels, where committees meet fortnightly (Kluger Dionigi, 2017, pp. 22-34). Alas, due to the relevance of trust and personal contacts between MEPs and lobbyists, recruiting through the revolving door is a viable strategy for businesses to influence decision­making (Transparency International EU, 2021, p. 44f).

4.4 Lobbyism in other relevant Bodies in the Endorsement Process

There is little structured evidence of lobbyism in other regulatory bodies involved in the IFRS endorsement process (Figure 2). Walton (2020, pp. 304-306) provides an extensive anecdotal discussion of the opportunities for lobbying in the respective institutions. Notably, the author concludes that private funding and voluntary participation in the EFRAG and TEG provide business interests with access to the opinion formation stage of the endorsement process. The finding is shared by Chiapello and Medjad (2009, p. 454f) who argue that the financial sector and large audit firms dominate the bodies.

5 Thesis Summary

A series of treaty changes empowered the European Parliament. Now, it is a genuine co-legislator on equal footing with the Council of the European Union. The European Parliament can credibly block proposals in the ordinary legislative pro­cedure and the endorsement process.

The increasing use of trilogues between the EU institutions leads to earlier closures of legislation and affects both lobbyism and transparency. The availability of documents about trilogues is inadequate. Business groups respond to the trend by focusing on ‘key MEPs’ representing the European Parliament in interinstitutional negotiations.

A significant limitation of literature about lobbyism is the presence of hidden lob­bying in the European Parliament. Currently, the European Parliament's Rules of Procedure do not rule out the possibility that MEPs meet unregistered lobbyists or not disclose meetings.

Corporate interests are particularly influential when issues are highly technical and not politicized. Accounting regulation is both and, thus, an attractive policy area for business interests.

The field of accounting regulation provides promising research opportunities. Notably, there is an imbalance between its research attention and its economic rel­evance for the European Union. The analysis of the role of public attention for leg­islation on accounting regulation constitutes an attractive approach for future re­search - especially because accounting standards and transparency regulation highly differ in terms of their recognition by the public.

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Appendix

Figure 1: The Ordinary Legislative Procedure (OLP)

Abbildung in dieser Leseprobe nicht enthalten

Figure 2: The IFRS Endorsement Process

Figure 3: The Internal Organization of the European Parliament

Abbildung in dieser Leseprobe nicht enthalten

Figure 4: Inside the European Parliament: The Committee Process

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Table 3: The Measurement oflnterest Group Influence (3/3)

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[...]

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¹ See https://www.europarl.europa.eu/news/en/press-room/20220701IPR34365/taxonomy-meps- do-not-object-to-inclusion-of-gas-and-nuclear-activities. Accessed on 22.08.2022.

² See ec.europa.eu/transparencyregister/public/consultation/statistics.do?locale=en&action=pre- pareView. Accessed on21.08.2022.

³ Alongside of the OLP, special legislative procedures (TFEU Art. 289 (2)) are designated for sen­sitive policy areas like taxation or foreign policy requiring unanimity among member states. For instance, under Consent the EP can only accept or reject (i.e., not amend) a proposal, and under Consultation it may only provide an opinion recommending amendments.

⁴ www.influencemap.org

⁵ The European treaties also empower the EP to request proposals from the EC (TFEU Art. 225).

⁶ Trilogues are informal consequences of treaty changes that permitted a closing at any stage of the OLP - they are not explicitly provided for by EU treaties (European Parliament, 2020, p. 26).

⁷ 26 standing and three sub-committees (Figure 3 illustrates the EP’s internal organization)

⁸ The EC uses delegated acts to change non-essential (technical) details of regulations avoiding a formal legislative procedure (TFEU Art. 290). The fact the EC issued a delegated act for the salient EU taxonomy amendment illustrates the present room for interpretation.

⁹ See www.europarl.europa.eu/news/de/press-room/20220613IPR32812. Accessed on20.08.2022.

¹⁰ Although there is no explicit legal basis for additions (carve-ins), Dobler (2020) examines a case in which the EU used a defacto carve-in endorsing an amendment to IFRS 4 Insurance Contracts.

¹¹ Legal basis of the RPS is Art. 6 IAS Regulation invoking Decision 1999/468/EC (5a) (1-4). As implementing acts have only been introduced in Lisbon, the PRS equals a ‘pre-Lisbon’ Comitology. A reconciliation proposal was withdrawn in 2015 (European Parliament, 2016, pp. 5-8).

¹² Art. 3 (2) IAS Regulation enshrines the criteria about ‘true and fair view’, qualitative aspects, and the Europeanpublic good (Bischof & Daske, 2016, p. 1).

¹³ While EFRAG provides the EC with an opinion about the issues’ technical compliance with EU framework directives, the ARC provides the political approval by member state representatives.

¹⁴ The Economic and Financial Council (ECOFIN), composed ofTreasury Secretaries

¹⁵ Business interests have structural power over legislation because they have discretion about investments and provide employment.

¹⁶ See ec.europa.eu/transparencyregister/public/consultation/statistics.do?locale=en&action=prepar eView. Accessed on21.08.2022.

¹⁷ See https://ec.europa.eu/transparencyregister/public/consultation/displaylobbyist.do7idM771817 758-48. Accessed on 21.08.2022.

¹⁸ For instance, companies have to retrain staff, update financial reporting software, and redefine accounting processes. Monsen (2022, p. 3f) finds that the Big 4 lobby U.S. GAAP in ways that increase demand for their services and favor their clients. There is no resembling literature in the context of the EU.

¹⁹ Note that TFEU Art. 15 (3) differentiates between the transparency of legislation and administra­tion, accepting a lower level of transparency for the latter

²⁰ A ‘conditionality principle’ was introduced with the mandatory TR. It stipulates that to carry out said activities in the EU, lobbyists have to be registered (European Union, 2021, Art. 2(h)).

²¹ In 2019, revising its RoP, the EP improved its transparency by requiring committee reports to be adopted and published before negotiations start (Transparency International EU, 2021, p. 28).

²² EUR-LEX (eur-lex.europa.eu)

²³ A telling precedent was a ruling of the General Court of the EU (2018) against the EP that refused the plaintiff access to documents about ongoing legislation. Unless it caused external pressure to materialize, The General Court opposed the EP’s view that it undermined its decision-making.

²⁴ The EP’s website (www.europarl.europa.eu/portal), among others, provides information about proceedings in committees, an interface to petition document access, and the Legislative Observa­tory that gathers information on the ongoing decision-making process.

²⁵ For instance, disclosures by the current ECON chair Irene Tinagli: www.europarl.europa.eu/meps/ en/197591/IRENE_TINAGLI/meetings/past#detailedcardmep

²⁶ Section 4.3 amplifies lobbying in the EP’s intergroups. Figure 3 shows the EP’s internal structure.

²⁷ See EuropeanUnion (2021)

²⁸ See www.integritywatch.eu/about.php and www.integritywatch.eu/mepmeetings. Accessed on 22.08.2022.

²⁹ See www.lobbyfacts.eu/about. Accessed on 22.08.2022.

³⁰ Compared to 52 meetings with EC representatives and 413 consultation responses to the EC or to EFRAG’s Technical Expert Group (TEG)

³¹ See www.integritywatch.eu/mepmeetings.php. Accessed on 22.08.2022.

³² For instance, on policy preferences (Kluver, 2013), influence attempts by interest groups (Mar­shall, 2010), the circumstances of access to the EP (Bouwen, 2004), and decision-makers’ responses to influence attempts (Rasmussen, 2015).

³³ As in Bouwen (2004), Kluger Dionigi (2017), or Walton (2020))

³⁴ As in Marshall (2010) and Rasmussen (2015), semi-structured interviews allow for some explor­atory researchby including open questions.

³⁵ As it is reasonable to assume that all MEPs meet interest representatives at some point in time, not being able to tell MEPs not disclosing meetings from MEPs not having meetings is no concern (Font & Perez-Duran, 2022, p. 8).

³⁶ It is, thus, important to structure interviews in ways that avoid gaming by participants. For in­stance, by emphasizing confidentiality (Georgiou, 2004, p. 220).

³⁷ Interest group preferences, influence attempts, access to decision-makers, decision-makers‘ responses to influence attempts, the policy outcome, and perceptions of the outcome

³⁸ For instance, Kluger Dionigi (2017, p. 6f) picks up on the recommendation of using multiple methods. It is important to beware that this approach can also accumulate methods’ weaknesses, for instance by further reducing sample sizes and increasing the complexity.

³⁹ For instance, by shifting lobbying venues (Rasmussen, 2015, p. 369)

⁴⁰ There is an imbalance between the power of the EP and its media coverage, tendentially enhancing the power of business interests in the EP contrary to their national domain (Kluger Dionigi, 2017, p. 19; Rasmussen, 2015, p. 368).

⁴¹ About 70% of the meetings with MEPs recorded by Integrity Watch EU took place outside of committees (18,628 of 27,054).

⁴² There is evidence, however, that the openness of committees is biased towards their policy area (Ibenskas & Bunea, 2021, p. 567).

⁴³ For instance, the hearing that the ECON held on the occasion of the EC’s EU Taxonomy Dele­gated Act (Section 2.1), see www.europarl.europa.eu/committees/en/joint-econ-envi-public-hear- ing-on-taxono/product-details/20220523CHE10241

⁴⁴ See www.europarl.europa.eu/about-parliament/en/organisation-and-rules/organisation/inter- groups. Accessed on 22.08.2022.