June 10th marks the application date of the revised Shareholder Rights Directive (SRD II). The new rules were proposed to promote long term shareholder engagement and address shortcomings in corporate governance of listed companies which were exposed by the financial crisis.
Asset managers are supportive of the new rules and fully committed to comply with them. Nevertheless, any country-specific nuances that are not yet known will be hard to comply with by the deadline. We therefore call upon the European Commission to ensure a swift transposition of the Directive in all Member States.
The Directive tries to strike the right balance by providing a bundle of rights and obligations on EU listed companies, institutional investors, asset managers, proxy advisers and intermediaries. Investors and asset managers gain more control over executive compensation and related party transactions, but are now subject to more stringent transparency rules. These include:
-
public disclosure of engagement policy, including voting behaviour, and its implementation, and
-
reporting to institutional investors on how the investment strategy and its implementation relates to the mandate and contributes to the medium to long-term performance of the assets.
Companies are granted the right to identify their shareholders but, on the other hand, they must provide greater transparency on executive pay and related party transactions.
EFAMA is very supportive of the new rules, which are believed to improve investors’ long-term engagement and investment in companies. The Directive strengthens asset managers’ incentives to engage with the companies in which they invest their clients’ capital, so as to ensure the long-term potential of those holdings and preserve and add value for clients. Asset managers engage with investee companies on topics such as long term business strategy, board composition including gender diversity, sustainability and impact on the environment, executive remuneration, capital allocation, and other ESG issues.
Asset managers have been actively preparing to comply with the new rules. EFAMA tried to support its members by facilitating an exchange of information on the provisions enacted in different Member States. Nevertheless, it has been challenging as, to EFAMA’s knowledge, many country-specific nuances are still not yet known, and therefore will be hard to comply with ahead of the deadline.
A publication of all national laws and specific country provisions in one central place (e.g. website of the European Commission) would be highly appreciated and would help all relevant markets participants to comply with the new rules.
Statement
© EFAMA - European Fund and Asset Management Association
Key
Hover over the blue highlighted
text to view the acronym meaning
Hover
over these icons for more information
Comments:
No Comments for this Article