A Survey of Legal and Regulatory Trends
Edited by P. M. Vasudev and Susan Watson
Chapter 3: The proposed Directive on the encouragement of long-term shareholder engagement in European listed companies: a critical appraisal
In the aftermath of the Financial Crisis of 2008–09, the reactions of the European Union to the problems raised by corporate governance were slow and were mainly addressed to the reform of the governance of financial institutions. Only in April 2014 did the European Commission present a proposal for a Directive on the encouragement of long-term shareholder engagement addressed to all listed companies. This chapter argues that, considering the evolution of the academic and political debate, the expected impact of the Commission’s proposal, if it is finally adopted, will be modest and will probably not achieve its intended shareholder empowerment goals. The chapter suggests that the reasons for this anticipated poor outcome are rooted in (a) the lack of a satisfactory theoretical and empirical basis to support the adoption of the measures proposed; and (b) the inherent weaknesses of European law in creating a single and coherent legal framework for corporate governance. The chapter concludes by reiterating the risks in relying on the inherent weaknesses of European law in the attempt to correct proposed legislation in ways that are not supported by solid empirical evidence. Keywords: • European corporate governance • Say on pay • Shareholder engagement • Shareholder Rights Directive • European Commission Green Paper 2011 • European Commission Action Plan
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