Experts aim to boost shareholders’ rights

The European Commission will on Monday (24 July) publish the recommendations of a high-level group of experts on the proposed shareholders' rights directive.

The proposal is currently being considered by the European Parliament and the Council of Ministers. The European Corporate Governance Forum wants the proposal to include a rule requiring financial intermediaries, such as banks and brokers, to provide voting services to shareholders.

The complex cross-border chains that exist between issuers and shareholders make it difficult for shareholders effectively to exercise their voting rights. The forum suggests that intermediaries could vote on behalf of clients or pass on requests for voting proxies, ensuring that these are received by investors wishing to vote.

Dutch lawyer Jaap Winter, a member of the forum, said: "We need to create a rule at EU level that looks through the chain of intermediaries to allow clients to exercise their voting rights. I would see it as a real legal obligation." While agreeing with the overall concept, Vanessa Knapp, a partner at Freshfields Bruckhaus Deringer in London and a member of another Commission expert group on company law and corporate governance, expressed doubts about the practicalities of imposing obligations. "Part of the problem is that the chains depend on contracts between people and different trust laws," she said. "The best thing might be to leave it up to the market."

Winter, a former Unilever executive who advised the Romano Prodi Commission on company law issues, is doubtful that guidelines would suffice. "If you left it to the market, you would have the situation we have today," he said. "The whole process can be made relatively efficient at a very low cost. Of course, intermediaries will have to adapt their system."

The directive, proposed in January by the Commission, is still at committee level in Parliament and is being discussed by a Council working group.

The European Commission will on Monday (24 July) publish the recommendations of a high-level group of experts on the proposed shareholders' rights directive.

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