GERMANY/NETHERLANDS - German government proposals to sharpen the rules on ‘acting in concert' will be detrimental to the attractiveness of the German capital markets, said Eumedion, the Dutch platform for institutional investors.
This proposed new regime for corporate investors, such as hedge funds and private equity firms, is meant to increase transparency and prevent collaboration among investors in German companies. It would give the German regulator powers to withdraw offending corporate investors voting rights for six months.
"In the spirit of information sharing to improve corporate governance of Western European companies, we are in particular concerned about the proposals," Eumedion's executive director Rients Abma stated in a letter to Germany's finance minister Peer Steinbruck.
According to Eumedion, which represents 61 institutional investors with over €1trn in assets, these proposals will have a very negative impact on the willingness and ability of investors to remain active on the German markets.
"Such an approach would be contrary to the response needed to the challenge of population ageing in Europe, and the need to provide in the most effective way for our citizens long-term savings," Abma added.
Hermes, the BT pension fund-owned asset manager, had earlier warned the planned German legislation to curb cooperation between investors, could weaken corporate governance standards.
The proposal legislation against ‘acting in concert' - a legal definition of cooperation on share votes - will cause "juridicial insecurity and make a constructive dialogue between investors more difficult", Hermes argued.
The International Corporate Governance Network (ICGN) has also expressed concern that the proposed law will introduce uncertainty as to whether shareholders discussing corporate governance matters, might be captured within the concert party rules.
The ICGN asked the German government to exclude rules which also capture responsible ownership activities, such as voting and engagement on corporate governance matters, from the proposals. The ICGN's membership spans 40 countries and represents assets of over €10trn.
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