Industry body puts stocklending at heart of Dutch stewardship code

A €5trn investor group has published a new investment stewardship code for the Netherlands, including restrictions on stocklending.

Eumedion, the Netherlands-based corporate governance and sustainability forum for institutional investors, said short-sellers could abuse their voting rights to vote against the interests of a Dutch listed company and, as a consequence, its shareholders.

The group said this was at odds with responsible shareownership aimed at long-term value creation.

The code requires that institutional investors recall any shares loaned out ahead of a company’s AGM if significant matters are on the agenda.

In addition, investors that hold short positions will have to abstain from voting if their short positions exceed their long holdings.

Eumedion presented a draft code last September, but because of the amount of comments it received, it has only now come up with a final version. The new code will come into force as of 1 January 2019.

From 10 June next year, institutional investors must also adhere to the European Shareholder Rights Directive (SRD) – but according to Rients Abma, Eumedion’s director, the Dutch code is much stricter on short-selling.

“The European rules are the minimum and the Dutch code is additional,” Abma said, quoted by Dutch financial newspaper FD. “In our opinion, the new rules match the Dutch stakeholder model, which not only takes financial value for shareholders into account, but also considers companies’ broader impact on, for example, workers, clients and society.”

For the same reason, the new rules also required that institutional investors must be transparent about their voting behaviour and should to consult workers, NGOs and clients, the director added.

According to the FD, Harm-Jan Kluiver, secretary of the Association of Securities-Issuing Companies, was critical about the shortsellers clause, arguing that it meant application of the code was at the members’ discretion.

Eumedion has 65 participants, both Dutch and non-Dutch, including the world’s largest asset manager BlackRock and leading Dutch pension funds ABP, Vervoer, PFZW, PME and PMT.