‘One share, one vote’ not panacea, says MEP

A leading member of the European Parliament’s economic and monetary affairs committee has cast doubt on the practicality of reforming EU corporate governance to require quoted firms to introduce ‘one share, one vote’ rules.

German liberal MEP Wolf Klinz, one of the committee’s most influential members on financial services legislation, told a conference on corporate democracy that ‘one share, one vote’ might not be the way forward. "Is ‘one share, one vote’ the only instrument to ensure good corporate governance…I have my doubts," he said. He stressed that he was speaking personally last week (7 December), because the Parliament had yet to address the issue.

Internal Market Commissioner Charlie McCreevy has been a powerful advocate of ‘one share, one vote’ rules, arguing that such corporate democracy is good for governance, creating proportionality between shareholders’ economic stake in companies and their voting rights.

But, said Karel Lannoo, managing director of the Centre for European Policy Studies (CEPS), a Brussels think-tank, there are some signs that, compared with the strongly pro-corporate democracy position he took at his confirmation hearing before the Parliament in October 2004, McCreevy himself has become more cautious.

Back in 2004 McCreevy said: "There is a strong medium- to long-term case for aiming to establish a real shareholder democracy in the EU." In a speech in June, however, McCreevy stressed the importance of the investigations that have been launched into the ‘one share, one vote’ issue.

Commenting on the external studies of corporate democracy the Commission had just launched, McCreevy said: "Any discussion about how to move on, about possible initiatives in this area, needs to be based on sound facts." He added: "Legislation will probably not be the best way to confront this problem. A recommendation may be more appropriate."

A company secretary of a leading EU-listed company said: "Perhaps McCreevy’s passion for this issue is waning."

Commission officials say that while ‘one share, one vote’ is a seductive slogan, real life is more complex. Some cite the fiasco of the EU’s takeover directive as a warning about the risks of trying to legislate in this field.

Some experts point out that, with equity markets having developed new types of shares and financing, the ‘one share, one vote’ principle is no longer so easy to apply. At a time when EU citizens are showing signs of becoming Europhobic, directives should be used only when it is clear they are the best instrument, and evidence has yet to be produced in this case.

Other corporate governance experts argue that there are legal doubts about the right of the Commission to regulate in this field.

A leading member of the European Parliament’s economic and monetary affairs committee has cast doubt on the practicality of reforming EU corporate governance to require quoted firms to introduce ‘one share, one vote’ rules.