Shareholders rights Directive By ProfdrLutgart Van den Berghe ecoDa amp GUBERNA 2 December 2014 The SH rights directive Wants to improve corporate governance By increasing the rights amp duties of shareholders as corporate monitors ID: 400235
Download Presentation The PPT/PDF document "Hearing European Parliament" is the property of its rightful owner. Permission is granted to download and print the materials on this web site for personal, non-commercial use only, and to display it on your personal computer provided you do not modify the materials and that you retain all copyright notices contained in the materials. By downloading content from our website, you accept the terms of this agreement.
Slide1
Hearing European ParliamentShareholders’ rights Directive
By: Prof.dr.Lutgart
Van den Berghe
ecoDa & GUBERNA
2 December 2014Slide2
The SH rights directive : Wants to improve corporate governance By increasing the rights & duties of shareholders as corporate monitorsWhile shifting key decision-making powers away from the Board of Directors (implicit mistrust of
boards?)
Will this effectively work??? Will this be sufficient?Without attention for the great heterogeneity in shareholder models throughout EuropeWithout really solving the barriers of the dispersed shareholding model of the listed companies
THE EUROPEAN CONFEDERATION OF DIRECTORS ASSOCIATIONS - AVENUE DES ARTS
41
B-
1040 BRUSSELSSlide3
Barriers of the dispersed shareholding model?
Challenge n°1
: inactive/passive shareholders do not perform a monitoring role as assumedWill the SH Directive change this situation? Can inactive shareholders become the micro-managers this Directive implies?What remedies are possible?More attention for shareholder duties & transparencyIncentives for active monitoring?
Giving more rights to nominate/dismiss (independent) directorsAllowing ‘acting in concert’ in case of...?
THE EUROPEAN CONFEDERATION OF DIRECTORS ASSOCIATIONS - AVENUE DES ARTS
41
B-
1040 BRUSSELSSlide4
Barriers of the dispersed shareholding model?
Challenge n°2
: many SH are short-term orientedWill the SH Directive change this situation?What are possible remedies?Incentives for long-term shareholders (SH rights/Div)Quid business model of the stock exchange?More obligations for Asset Managers (and Institutional Investors) to disclose their investment strategy
More accountability for proxy advisorsQuid self-regulation or hard law? Minimal condition of strict monitoring!
THE EUROPEAN CONFEDERATION OF DIRECTORS ASSOCIATIONS - AVENUE DES ARTS
41
B-
1040 BRUSSELSSlide5
Barriers of the dispersed shareholding model?Challenge n°3
: the complex investment chain
Will the SH Directive change this situation?What remedies are realistic?Transparency as a first stepMaking institutional investors & asset managers more accountable towards their customers/final owners BUT can final owners really become monitors of such shareholder policy?
THE EUROPEAN CONFEDERATION OF DIRECTORS ASSOCIATIONS - AVENUE DES ARTS
41
B-
1040 BRUSSELSSlide6
Other relevant shareholder models?O
bservation 1: the dispersed shareholding model is by far not the dominant form of listed companies, throughout the EU
Observation 2: assuming that institutional shareholders are the most important shareholder group in the EU is not correct either=>Challenge n°4: controlling shareholders may pose the opposite challenge: abusing their monitoring power and insider positionCorrect to focus attention in SH Directive on the downsides of
both types of governance model
THE EUROPEAN CONFEDERATION OF DIRECTORS ASSOCIATIONS - AVENUE DES ARTS
41
B-
1040 BRUSSELSSlide7
Barriers of the controlling shareholder model?
What are possible remedies?
Sufficient independent directors in the board and board committees to guarantee the focus on the corporate interestQuid group governance recommendations?More attention for related parties transactionsHowever, be aware of regulatory and especially business inefficiencies of the proposed measures!
THE EUROPEAN CONFEDERATION OF DIRECTORS ASSOCIATIONS - AVENUE DES ARTS
41
B-
1040 BRUSSELSSlide8
More attention for the monitoring role of an ‘effective’ Board of Directors
Advantage 1: legal duty to focus on the corporate interest
Advantage 2: in-depth knowledge of the business, its context and operationsConditions:Professional directors (well educated and critically evaluated) Guaranteeing independence of board decision-makingEffectively monitored by active shareholders, who have explicit rights as to director nomination, remuneration and dismissal
THE EUROPEAN CONFEDERATION OF DIRECTORS ASSOCIATIONS - AVENUE DES ARTS
41
B-
1040 BRUSSELSSlide9
ecoDa
The European Voice of Directors
Thank you