ICGN recommends changes to European shareholder rights

October 31st, 2024

The International Corporate Governance Network (ICGN) has issued recommendations to the European Commissions aimed at harmonising shareholder rights and creating more cohesive legislation.

The non-profit organisation, which is backed by investors with €71 trillion assets under management, suggested that a revision to the Shareholder Rights Directive II should focus on removing the remaining barriers to a modern and efficient voting process.

This could be achieved through measures to ban power of attorney requirements, physical attendance requirements, obstacles to split-voting and manual processes, according to the group.

It also urged the European Union to ensure that the ban on share blocking is implemented by all market participants in the European Economic Area as part of efforts to remove obstacles to shareholder voting.

ICGN also called on the European Commission to harmonise annual general meeting practices as well as standards on shareholder proposals.

The group also expressed its support for the “one share, one vote” standard to avoid problematic disparities in voting rights, which can cause misalignment between control and economic interests while diluting the voice and influence of minority shareholders.

It also recommended that the directive on multiple-vote share structures is amended to include a set of minimum mandatory safeguards for multiple-class shares.

ICGN said: “There should be mandatory class-by-class vote disclosure, whereby companies with multiple classes of shares are required to disclose vote tallies for each class.

This gives visibility to both investors and to the boards and management of companies as to the nature of the preferences of both insider and independent shareholders.”

Further action is needed to ensure that investors can rely on high quality corporate sustainability disclosure and remove perceived obstacles to collaborative engagement, according to the group.

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