Brussels, 11/06/2007 (Agence Europe) - Published last week by the Commission, an external study shows that control-enhancing mechanisms (CEM) of voting rights in listed companies are widespread in the EU. Under corporate law, CEM are understood to be mechanisms such as multiple-voting rights, voting caps, and non-voting preferential shares, as well as tools such as shareholders' agreements, cross-shareholding and company pyramids. Out of the 19 jurisdictions studied (16 EU member states plus Australia, United States and Japan), the study shows that no jurisdiction from the panel chose a legal system that recommended only the principle of “one share, one vote”, or that of authorising total freedom when it comes to voting rights organisation within a listed company. “Most jurisdictions lean towards a middle position: they authorise all between five and eleven CEMs”.
Out of the 464 European listed companies closely examined, nearly half have set up one or two of these mechanisms. According to the study, the countries with the highest proportion of companies operating with at least one of the mechanisms in question are “in descending order of importance, France, Sweden, Spain, Hungary and Belgium”. The most widespread mechanisms are the pyramid structures, shares with multiple-voting rights and shareholders' agreements. In a study annexed to the external study, most of the 455 institutional investors taking part spoke of the negative vision that they have of CEMs, the most harmful being, in their view, priority or “golden” shares, multiple-voting rights and voting caps. They look favourably at a reduction in the price of shares of listed companies that use CEMs.
Carried out jointly by ISS Europe - whose partiality has been challenged by French Socialist Pervenche Berès (see EUROPE 9387) -, the European Corporate Governance Institute (ECGI) and the private legal firm, Shearman & Sterling, the study concludes that it is not possible for deviation from the “one share, one vote” principle to have an impact on the economic results of the companies listed or on their management. It is more of a drawback for the supporters of shareholder activism. The external study will fuel the impact study that the Commission is carrying out and should make public this autumn. “We shall be asking ourselves, with an open mind, whether it is necessary for the Commission to take action in this field”, said Charlie McCreevy. The European commissioner for the internal market had pointed out in 2005 that he preferred the “one share, one vote” principle (see EUROPE 9081 and 9074). See the study at: http: //ec.europa.eu/internal_market/company/shareholders/indexb_en.htm (mb)