10 June 2024

ICGN: Shareholder Rights Directive (SRD) Evaluation – follow-up questions

Despite the objectives of SRDII to remove obstacles to voting and participation ingeneral meetings, our members still observe obstacles in practice, in some EU MemberStates, including....

.....Wider ranging questions
8. Has SRD2 made any di􀆯erence to the ease with which shareholders can exercise
their rights cross-border in the EU? If so, please explain.
There has been increased automation in the voting chain, which facilitates cross-border
voting. Intermediaries are, to some extent, transmitting information in a more timely
manner. Investors have obtained the right for vote confirmation, which is important,
although we regret that it is not systematic and not in a universal format.
9. What do you consider the most important remaining barriers to the exercise of
shareholder rights cross-border in the EU?
Despite the objectives of SRDII to remove obstacles to voting and participation in
general meetings, our members still observe obstacles in practice, in some EU Member
States, including:
 Power of attorney (POA) requirements, which are often unnecessarily
burdensome (e.g. Belgium, Sweden) and di􀆯er across the EU.
 Requirement for physical attendance by investors to be able to vote, and manual
counting of voting.
 Cut-o􀆯 date often set too early, and meeting materials sent too late – leaving
limited time for investors to make informed voting decisions
 Split voting is not always allowed.
 Lack of automatic vote confirmation
 Lack of common definition of “shareholder” in the EU, and therefore limited
transparency on beneficial owners.
 Barriers to the filing of shareholder proposals
 AGM practices introduced during the COVID emergency remaining in some
markets (e.g. Italy still allows companies to conduct “behind closed doors”
AGMs, and several markets allow fully virtual AGMs)
 Situations where independent board directors can be removed at any time by a
resolution of a shareholder general meeting and without the necessity of the
cessation proposal being included in the shareholders’ meeting agenda. (e.g.
Spain)
 Shareblocking remains an issue in some markets.
 Some tabulators require direct instructions from investors and do not accept
instructions from the proxy voting vendor plateform, which creates unnecessary
obstacles for investors.
10. How widespread are these barriers (above)? Are they more present in some
Member States than others (if yes, which?) If you were to venture a guess, what
percentage of shareholders in the EU overall (EU and Third Country) would be
a􀆯ected by these barriers (e.g. up to 20%/ between 20-40%; 40-60%; between 60-
80%; more than 80%)? Is the situation improving or not since the implementation
of the SRDs?
No response
11. Looking ahead, what are the most important changes needed to the SRD
framework? Name up to five key changes
1. Remove barriers to a modern and e􀆯icient voting process, by banning
burdensome power of attorney requirements, physical attendance
requirements, and manual processes.
2. Introduce minimum harmonisation of AGM practices:
- ICGN published a statement in April 2023 on Post Covid AGMs and
Shareholder Rights, calling on regulators to discourage the practice of
companies adopting virtual-only AGMs and to require that companies
provide for hybrid AGMs to allow global investors to have the option of
virtual or live participation.
- Agree on a common definition and a harmonised approach to “record
date”.
- Vote deadlines set by intermediaries and custodians can be sometimes
significantly ahead of the AGM, preventing investors from casting their
votes in the most informed manner possible. Further EU harmonisation
would be beneficial, to ensure that the cut-o􀆯 dates are set closer to the
meeting dates. A shorter window between vote cuto􀆯 and meeting dates,
would help enable more informed, better decisions on proxy matters.
- Meeting materials should be distributed su􀆯iciently in advance to allow
for informed decisions – this is often not the case.
- Investors need the votes to be counted systematically, the vote tally to be
published, and transparency on voting outcome per agenda item.
3. Introduce mandatory and robust investor protection safeguards when
companies adopt dual-class share structures. The Shareholder Rights
Directive encourage investors to play a greater, and more responsible, role in
monitoring company governance and engaging with companies, yet the
proposed directive on multiple-vote share structures has the e􀆯ect of
watering down their influence. Strong and mandatory investor protection
safeguards should be required.
4. Ensure that shareholders can file proposals (including advisory shareholder
proposals), and introduce a set of harmonised rules for the Single Market
(thresholds, nature, conditions, etc.)
5. Ensure that the ban on share blocking is implemented by all market
participants, in all EEA member states.

 

ICGN

© ICGN - International Corporate Governance Network