On 9th April 2014, the European Commission adopted measures to improve corporate governance of around 10,000 companies listed on Europe’s stock exchanges, by proposing certain amendments to the Shareholder Rights Directive (Directive 2007/36/EC). Internal Market and Services Commissioner Michel Barnier stated that “Today’s proposals will encourage shareholders to engage more with the companies they invest in, and to take a longer-term perspective of their investment”.
The proposal to revise the existing Shareholder Rights Directive would tackle corporate governance shortcomings relating to listed companies and their boards, shareholders (institutional investors and asset managers), intermediaries and proxy advisors (that is, firms providing services to shareholders, notably voting advice).
The proposals would both make it easier for shareholders to use their existing rights over companies and enhance those rights where necessary. Key elements of the proposal include stronger transparency requirements for institutional investors and asset managers on their investment and engagement policies regarding the companies in which they invest as well as a framework to make it easier to identify shareholders so they can more easily exercise their rights (for example voting rights), in particular in cross-border situations.
For the first time, a European “say on pay” would be introduced, and the proposals would oblige companies to disclose clear, comparable and comprehensive information on their remuneration policies and how they were put into practice. There would be no binding cap on remuneration at EU level, but each company would have to put its remuneration policy to a binding shareholder vote.
A copy of the revised Directive can be found here.