Institutional investors are calling on the new European Commission to standardise the rules for shareholder voting at companies’ annual meetings.
The International Corporate Governance Network (ICGN) has written to Ursula von der Leyen, who is beginning her second term as Commission president, to make a series of recommendations about strengthening shareholder rights.
“Investors’ ability to act as responsible and effective stewards is reliant on them having rights and protections, such as the right to vote on major issues affecting the company, the right to participate in annual general meetings, the right to information, etc,” said a letter signed by ICGN chief executive officer Jen Sisson, on behalf of hundreds of financial institutions.
“We observe that some barriers to the exercise of shareholder rights remain in the European Union,” she continued, pointing to “legal and regulatory obstacles” and operational issues including local rules that complicate the landscape for foreign investors, and make it difficult to automate and standardise processes.
In France, for example, company management can reject shareholder proposals, while it’s common in Germany for employees to sit on a company’s supervisory board, meaning investors can’t make conclusive decisions at annual meetings.
EU member states have different thresholds for share ownership before an investor can file a resolution, and in some places they aren’t binding.
There are also challenges around split-voting, and power of attorney and attendance requirements at annual meetings.
“We encourage the European Commission to address these issues through greater harmonisation of corporate governance and shareholder rights rules at EU level – particularly through the revision of the Shareholder Rights Directive II,” Sisson wrote.
SRDII is currently being revisited, and a growing number of investors and government advisors are hoping it will be updated to include European-level rules on shareholder voting.
Currently a directive – meaning member states have room to adopt the law in a way that fits with their existing national frameworks – Sisson said ICGN supported the possibility of SRD becoming a regulation, so the rules are standardised across the bloc.
The letter also proposes that, to reduce fragmentation, all policy files relating to sustainable finance, corporate governance, shareholder rights and the functioning of markets should sit under the same team of the new Commission, which is expected to be fully formed by the end of the year following the summer elections.
“Enhanced harmonisation and coherence would be an important step towards the achievement of the Capital Markets Union and EU Sustainable Finance Agenda, and would help strengthen the attractiveness and competitiveness of Europe’s capital markets,” it argued.
Finally, Sisson urged von der Leyen to remove “perceived obstacles” to collaboration engagement, saying that investors need more reassurance they can work with peers to influence companies on material sustainability issues without flouting acting-in-concert rules.
ICGN wants the European Commission to ask the European Securities and Markets Authority to update its 2014 guidance on acting in concert to support these efforts.
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