The Challenging Issue of Institutional Shareholder Engagement in EU Corporate Law: Perfectible Solutions and Perspectives for Reform

Sergakis, K. (2014) The Challenging Issue of Institutional Shareholder Engagement in EU Corporate Law: Perfectible Solutions and Perspectives for Reform. 7th Annual Legal Research Network Conference: The Interface of European and National Law, Bristol, UK, 3-4 Sep 2014.

Abstract

Shareholder engagement seems to be the ultimate means for steady improvement in corporate governance standards, as well as a powerful tool for refocusing short-term strategies towards more sustainable and viable business projects. Although EU institutions have endeavoured over the past decade to facilitate the exercise of a wide range of shareholder rights, the impact of such regulatory initiatives remains to be seen. This paper challenges the current EU regulatory approach by supporting the idea that, while it has touched upon important topics, such as companies or financial intermediaries, hoping that the investor community will make full use of its discretion and evaluation of these actors, it has avoided resolving another crucial issue, namely that of investor behaviour. In fact, institutional investors have been partially accused of apathy and contributing indirectly to the EU capital markets crisis. EU law thus needs to find new ways to nurture and maintain an effective willingness to engage in long-term dialogue with companies. The current paper aims to critically analyse some important EU initiatives in the area of corporate governance which, although trying to achieve harmonisation in how corporate compliance is conceived and applied, still remain disconnected from the investors who are the ultimate beneficiaries of these efforts. Moreover, the paper will aim to project a possible new regulatory pathway affecting financial intermediation and institutional shareholder groups in order to propose an alternative that would have greater potential to drive much more responsible investor behaviour. Part 1 will give a critical review of the current European developments in the area of investee companies and will indicate the problematic issues that have arisen from the use of the ‘comply or explain’ principle in corporate governance statements. Part 2 will focus on the regulatory efforts to enhance shareholder activism and will critically assess the latest trends in the ‘Stewardship’ movement in the EU, analysing the UK Stewardship Code as a forerunner in the field and proposing its potential adoption at the EU level. Part 3 will touch upon other EU regulatory initiatives that aim to better control some other types of financial intermediaries that are closely linked to shareholder activism, such as the proxy advisory industry, whose role requires it to be more transparent and more thoroughly examined. Part 4 will defend a holistic conception of shareholder engagement with investee companies and the need to adopt an EU regulatory path of wider applicability that would link various market actors in an optimal way. Part 5 will draw conclusions from the abovementioned issues and reflect upon future EU policies.

• Item Type: Conference or Workshop Item
• Status: Published
• Refereed: Yes
• Glasgow Author(s) Enlighten ID: UNSPECIFIED
• Authors: Sergakis, K.
• College/School: College of Social Sciences > School of Law

Related URLs

• Organisation