NETHERLANDS - Roderick Munsters, chief investment officer of Europe's largest pension fund Stichting Pensioenfonds ABP, has called for the European Commission to implement a ‘one share, one vote' system of shareholder ownership.

Munsters has teamed up with Peter Montagnon of the Association of British Insurers to make the plea in an article in the Financial Times.

They point out that the Commission is planning up to launch a study on shareholder democracy to help form a consensus on whether to push for better representation of shareholders by adopting the principle of one share, one vote.

And although Internal Markets Commissioner Charlie McCreevy is in favour "the idea is contentious and the debate is already emotionally charged".

"The outcome will, however, have important consequences," the two write. "Companies cannot be properly accountable to their shareholders unless the latter can express their opinion in proportion to the capital they have at risk."

They argue that the US, often behind the rest of the world in corporate governance, is actually in advance in this area.

"The democratic tradition is seriously lacking in European markets. A 2005 study by the Association of British Insurers and Deminor, the Belgian corporate governance service, showed that a third of large European companies restricted voting rights," Munsters and Montagnon say.

"Devices used included multiple voting rights accruing to ‘company-friendly' shareholders, priority shares with extra voting rights, the use of depositary receipts with no voting rights and ceilings on the use of votes."

They cite the example of Sweden, where one third of the capital by value accounts for two-thirds of the votes.

And they say there's no clear evidence that a preferential voting regime leads to better performance - and that the market does not value in restrictions properly.

The two say the "panoply of restrictive arrangements" has blocked the development of a properly functioning market for corporate control in the EU.

"No one believes the Commission can wave a magic wand and require an immediate end to all these restrictions but we need a fairer market.
 
"Voting restrictions that entrench management at the expense of owners should be progressively reduced and eventually eliminated altogether."

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