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IPE special report May 2018

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European Commission's proposed Shareholder Directive 'too detailed'

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The European Commission should redraft its proposal for the Shareholders Rights Directive as the current concept is “too detailed”, the International Corporate Governance Network (ICGN) has argued.

Speaking on a panel during the ICGN’s annual conference in Amsterdam, Susannah Haan, secretary general of EuropeanIssuers, described the proposal to increase disclosure on remuneration as “overkill”.

Peter Swabey, head of policy and research at the Institute of Chartered Secretaries and Administrators (ICSA), said the proposal, “for political reasons”, focused too much on remuneration.

His view was shared by many UK representatives at the conference who argued that the emphasis on remuneration came at the expense of strategy, risk management and financial reporting.

Meanwhile, Rients Abma, chief executive at Eumedion – the Netherlands-based corporate governance and sustainability forum of 69 institutional investors, representing €3trn in assets – warned of potential conflicts of interest arising from proposed rules for related party transactions.

He said shareholders with conflicting interests should not have voting rights on disputed transactions.

Peter Montagnon, panel moderator and associate director of the Institute for Business Ethics, said the European Commission had ignored stakeholders during extensive consultations.

“Nobody has identified why this proposal is a good idea,” he said.

Eumedion’s Abma said his organisation supported the Commission’s proposal, which he described as “balanced”, but he argued that it was nonetheless “too detailed”.

“More shareholders’ rights, for increased checks and balances within listed companies, should come with additional responsibilities, such as increased transparency on voting and engagement,” he added.

In Abma’s opinion, the Directive would make voting in other EU countries easier.

Eumedion went on to say that the proposed identification arrangements would not create a level playing field between companies and shareholders, as the latter would be unable to identify fellow shareholders.

On another panel, Winfrid Blatschke, senior corporate affairs economist at the OECD, said risk management needed more attention in the Directive.

“Some large companies have adopted risk models from financial institutions that have been discredited during the financial crisis,” he said.

During voting sessions, 50% of the audience said prescribed, detailed regulation for corporate governance would inhibit dialogue between companies and shareholders.

More than 40% agreed that the presence of a controlling stakeholder usually enabled companies to take a longer-term view, thereby strengthening their prospects.

More than 70% supported mandatory integrated reporting, while 62% of attendees said integrated reporting would make sustainable reporting more important.

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