Whereas Shareholder rights have been reinforced in Europe (Shareholders Rights Directive), in the US, after several years of progress, it looks like they may be headed in the wrong direction.
Despite its title, the “Financial Choice Act” - the bill passed by the House of Representatives two weeks ago - is seen as a gift for Wall Street and for banks and has been described as “a flagrant assault on shareholders rights”.
The bill aims to reverse the rules passed by the Obama Administration which were strengthening the banking system in order to avoid another financial crisis. With these new rules, regulators will have less power to impose tougher capital and liquidity standards on institutions deemed “too big to fail” and they would have to prove that the costs of imposing new rules would not outweigh the benefits.
The bill is also an attempt to hinder investors’ ability to file motions at shareholders meetings and to concentrate power in the hands of company executives. Whereas the current rule provides that shareholders must have a minimum $2000 stake in a company in order to put forward a motion at an AGM, with the new bill, shareholders would have to own at least 1% of a company’s stock for a minimum of 3 years to put forward a proposal.
Despite the threat for shareholders and investors, many think that the Senate will not adopt that bill but they fear that the act will be broken down into others bills.
Read the Financial Times article here