Brussels, 6 January 2022
Despite the entry into force of the Shareholder Rights Directive II (SRD II) in September 2020, and the importance the European Union places on Shareholder Engagement and Corporate Governance – the set of rules and practices dictating a company’s corporate strategy, risk management, environmental responsibility and ethical behaviour, as well as balancing the interests of the company’s stakeholders through accountability, transparency, fairness and responsibility – the exercise of shareholder voting rights, especially across borders, continues to face substantial obstacles to this day.
Some of the main obstacles to shareholder engagement derive from the complex chains of intermediaries and the use of omnibus accounts – with intermediaries or nominees who hold shares for individual investors – rendering the exercise of shareholder rights more difficult and costly, thus limiting shareholder engagement.
SRD II set out to ensure shareholders can exercise their fundamental rights – namely the right to participate in general meetings and exercise their voting rights – by removing these obstacles to shareholder engagement, especially cross-border within the European Union, and improving the transmission of information.
The 2021 general meeting season was the first full season with these new rules in effect, supposedly paving the way towards more shareholder engagement. Yet, a study by BETTER FINANCE and its member organisations looking at whether intermediaries were SRD II-ready and whether shareholders were able to fully exercise their rights by participating in, and voting at, general meetings across borders thanks to the new rules, revealed an alarming situation where, in the vast majority of cases, shareholders were not able to fully or partially exercise their fundamental rights at general meetings abroad.