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The financial crisis revealed that shareholders in many cases supported managers' excessive short-term risk taking. The revised directive is intended to redress this situation and contribute to the sustainability of companies, which will result in growth and job creation.
The new directive establishes specific requirements in order to encourage shareholder long-term engagement and increase transparency. These requirements apply to: remuneration of directors; identification of shareholders; facilitation of exercise of shareholders rights; transmission of information; transparency for institutional investors, asset managers and proxy advisors; and related party transactions
Shareholders will have the right to vote on the remuneration policy of the directors of their company. Under the new rules, remuneration policy should contribute to the business strategy, long-term interests and sustainability of the company and should not be linked to short-term objectives.
The new directive will ensure that companies are able to identify their shareholders and obtain information regarding shareholder identity from any intermediary in the chain that holds the information. The purpose is to facilitate the exercise of shareholder rights and their engagement with the company.
Intermediaries will have to facilitate the exercise of the rights by the shareholder, including the right to participate and vote in general meetings. They will also have the obligation to deliver to shareholders, in a standardised and timely manner, all information from the company that will enable the appropriate exercise of their rights.
The new requirements will help institutional investors and asset managers to be more transparent in their approach to shareholder engagement. They will have either to develop and publicly disclose a policy on shareholder engagement or explain why they have chosen not to do so.
Transactions with related parties may cause prejudice to companies and their shareholders, as they may give the related party the opportunity to appropriate value belonging to the company.