Norway’s sovereign wealth fund has told the European Commission there are serious problems in the way shareholder voting works across the union, sending a wish list for reforms that it says could make Europe’s capital markets more attractive and more integrated.
In its response this morning to the Commission’s consultation on the revision of the shareholder rights directive, launched in February, Norges Bank Investment Management (NBIM) said: “Across EU markets, that chain [voting chain through which shareholder rights are exercised] does not always operate as intended.”
NBIM, which manages the NOK21.8trn (€1.99trn) Government Pension Fund Global (GPFG), said the main problem was EU member states having implemented common rules differently, but also cited varied and early cut-off dates for voting, inconsistent meeting formats, and variable voting disclosure practices as other reasons for the complexity and poor visibility.
“The result is a fragmented system that undermines effective shareholder voting and makes it harder for us to support companies in achieving clear and legitimate outcomes,” it said, in a letter signed by Carine Smith Ihenacho, NBIM’s chief governance and compliance officer and two colleagues.
The trio said the Directive itself had delivered real improvements across a range of shareholder rights, and that their consultation response was homing in on one area where gaps remained — the effectiveness of the voting chain.
They made a series of specific recommendations for improvement, including requiring cut-off dates for investor voting to be set as close to the meeting date as possible, requiring companies to disclose the number of votes cast for, against and abstaining for each resolution and the proportion of share capital that participated, and requiring automatic confirmation of receipt at each stage of the voting chain.
On the latter point, Smith Ihenacho and her colleagues said timely confirmation that voting instructions had been received and correctly processed was essential, adding: “We currently have limited ability to verify this”.
NBIM also took aim at the way many annual general meetings (AGMs) are now held, saying the shift toward virtual-only or closed AGMs after the pandemic raised questions about the quality of shareholder participation.
“Shareholders have a legitimate interest not only in casting votes but in asking questions and engaging with boards in real time,” the organisation said, calling on the Commission to change the Directive to ensure that remote participation “complements rather than replaces in-person attendance”.
“These targeted reforms can also ensure that Europe’s capital markets are more attractive and more integrated,” NBIM said of its recommendations, adding that the revision of the Directive was an opportunity to do this.
