On July 8 the European Parliament voted in favour of the proposal to revise the Shareholders Rights Directive, published in April 2014 by the European Commission.
Early May, the European Parliament’s legal affairs committee (JURI Committee) had already backed amended rules by a narrow vote of 13 to 11. However, considerable differences among European Parliament’s political groups resulted in the rapporteur, MEP Sergio Gaetano Cofferati, submitting the vote to plenary.
The proposal was approved by 556 votes to 67, with 80 abstentions and MEPs will now enter into informal talks with member states aimed at seeking an agreement on the final version of the legislation.
“Intended to boost transparency and foster shareholders’ long-run commitment to companies”, the voted rules setout a country-by-country reporting obligation, under which large firms and listed companies would be forced to disclose information on profits made, tax paid on profits and public subsidies received.
The Parliament also agreed on rules on a « say on pay » by shareholder with a view on allowing them to vote at least every three years on a listed company’s remuneration policy for directors. It would then be up to each member state to decide whether a vote on remuneration policy at the general meeting of shareholders would be binding or advisory. However, it is unfortunate to note that the existing barriers to shareholder engagement within the EU are still to be overcome.
In order to “steer companies and investors towards long-term oriented decision making and ensure the engagement of institutional investors”, it would definitely help if individual cross-border shareholders (those domiciled in a Member State of the EU other than the issuing company) would be able to exercise their voting rights without having to pay huge fees to do so. As for individual investors whose shares are registered in nominee or omnibus accounts, the persistent failure of financial intermediaries to identify the beneficial owners of shares and send voting materials still prevents them from voting.
Ultimately, individual shareholders will not necessarily have an effective say on executive remuneration.
With their rights being ignored, it is fair to say that we are now looking at a Capital Markets Union without a single market for EU-wide shareholder engagement.