Brussels, 16/02/2015 (Agence Europe) - The revision of the directive framing shareholder rights has found it difficult to convince the business community. The latter identified a risk of the over prescriptive nature of legislation that could make the SMEs delist.
The BusinessEurope organisation has underlined the serious concerns about the “over prescriptive” nature of this European Commission proposed revision to stimulate long-term action from shareholders (see EUROPE 11235). The organisation says that excessive regulation could even push companies, particularly SMEs, to delist. It is estimated that 10% of companies would delist if legislation were too binding, although this is a popular way of accessing funding. BusinessEurope warned against the trend to leave it up to shareholders' general assemblies to develop a kind of “micromanagement”. Revision of the directive would effectively give the go-ahead for greater transparency and the identification of shareholders, as well as a right to vote of shareholders on wage policy (the introduction of the “say on pay” principle. Amendments submitted by the Greens/ EFA at the European Parliament in response to the LuxLeaks scandal is also seeking to introduce greater tax transparency (see EUROPE 11250). BusinessEurope says that there is therefore a danger that this revision would become over prescriptive if all the financial and non-financial reports are required.
European Confederation of Directors' Associations (ecoDa) has formulated similar recommendations. Its president, Lars-Erik Forsgardh, believes the revision should be less detailed and based more on principles because many models of enterprise governance coexist in Europe. He noted that the “say on pay” principle was more suited to companies where shareholder power and engagement is weak but that in jurisdictions with strong shareholder power, the drawbacks may well override the advantages on corporate governance standards. (Marie-Pauline Desset)