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Global investors share recommendations for the EU on shareholder rights

LONDON, UNITED KINGDOM / AGILITYPR.NEWS / October 29, 2024 / For immediate release – 29 October 2024, London, United Kingdom: The International Corporate Governance Network (ICGN) has written to the President of the European Commission - as a new College of EU Commissioners is being appointed that will soon define its priorities and work programme for the coming years – to share investors’ perspective on shareholder rights in the EU. Led by investors responsible for assets of approximately EUR 71 trillion, ICGN is a non-profit organisation that promotes high standards of corporate governance and investor stewardship, with members in more than 40 countries, including asset owners, asset managers and advisers.


To protect savings and pensions, and create long-term value for the millions of people who rely on them, it is vital for investors to be effective stewards – this is a key part of their fiduciary duty. To do that, investors need rights and protections, such as the right for shareholders to vote on major issues affecting the company, the right to participate in Annual General Meetings (AGM) and the right to information. Barriers exist to the exercise of shareholder rights in the EU, which ICGN is asking the European Commission to address. This can be achieved through greater harmonisation of EU corporate governance and shareholder rights rules - particularly through the revision of the Shareholder Rights Directive II - and more coherence between various pieces of EU legislation.


There are currently threats to shareholder rights in the EU, both in terms of legislation and practice. For example:

          ·        In France, a company’s board of directors recently decided not to include an advisory shareholder resolution calling for the separation of the roles of chairman and CEO on the AGM agenda. This meant shareholders were unable to vote on that proposal. 

          ·        Italy has recently adopted legislation allowing companies to conduct AGMs in a ‘closed door’ format. This significantly limits the ability of minority shareholders to interact with boards and management, which goes against the principles of shareholder democracy. 

          ·        In Poland, companies can disclose information about board director candidates three days before the AGM; this is often after the deadline by which shareholders must cast their votes, if voting by proxy. 

          ·        The EU has adopted legislation allowing multiple-vote shares, without the mandatory time-based sunset clause that investors have been calling for. –This enables founders or early investors to entrench themselves as majority voters forever, stopping ordinary small shareholders from holding them accountable or voting to change the situation. 


ICGN’s Global Policy Director, Severine Neervoort, said:


“There is a contradiction between, on the one hand, the EU Sustainable Finance Agenda and the expectation that investors play an active role in pushing companies to become more sustainable, and, on the other hand, legislation reducing their influence and making it much more difficult for them to hold company boards accountable.


Investors’ voice has not been sufficiently heard in Brussels over the years, which is why ICGN is launching a programme of engagement with EU institutions. We want to ensure the message is heard, that shareholder rights are essential to protecting beneficiaries – including savers and pensioners.”


In its letter to Ursula Van Der Leyden, ICGN has made six recommendations:  

  1. Remove obstacles to shareholder voting 
  2. Harmonise AGM practices 
  3. Harmonise rules on shareholder proposals 
  4. Introduce safeguards for multiple-class shares 
  5. Ensure investors can rely on high-quality corporate sustainability disclosures
  6. Removed perceived obstacles to collaborative engagement.  


Severine Neervoort said: “Even apparently small changes, such as allocating files related to financial and sustainability reporting, corporate governance, shareholder rights and the functioning of markets all to the same Directorate General within the European Commission would help achieve more coherence.”


Enhanced harmonisation and coherence between various pieces of EU legislation 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. Investors, beneficiaries and regulators all want to see long-term success for companies in thriving markets. 

Contacts

Kate Webster

Marketing Director

kate.webster@icgn.org

Third Floor, York House, 78 Queen Victoria Street

Phone: +44 (0)20 3838 4759

www.icgn.org