Shareholder voice on executive pay:A decade of Dutch say on pay

The Netherlands adopted shareholders’ say on pay over a decade ago. The general meeting of shareholders must approve the remuneration policy and any amendments to it. This Dutch approach offers fruitful insights into how say on pay works in practice. In the light of the recent European proposal to introduce a uniform say on pay, we examine the merits of the Dutch system. First, we describe the legal framework of the Dutch say on pay and its background. Then, using hand-collected voting data, information from the minutes of general meetings and ownership data for the entire Dutch say on pay period (2004–2014), we address and discuss both its direct and its indirect effects. Our study shows that, although remuneration proposals are seldom rejected, the influence of shareholders on the remuneration policy of the company is considerable. Furthermore, the Dutch approach to say on pay stimulates shareholders’ dialogue and increases pressure on boards regarding remuneration matters, even in the presence of large insider shareholders

Shareholder voice in complex intermediated proxy systems : blockchain technology as a solution?

Despite the great importance of shareholder engagement to date, the exercise of shareholder voting and other rights is substantially flawed. There are several different intermediated securities models used around the world that all drive a wedge between the issuer and the beneficial owner of the shares and the accompanying rights. In many jurisdictions including the US and the UK, the beneficial owner is not the legal owner of the securities, but rather an intermediary is considered the formal legal share owner. Other intermediated systems recognize the direct ownership of the investor, but impose a legal fiction on the number of intermediated tiers in the securities chain, ignoring practical holding chains (the Spanish system). This and the use of omnibus accounts at many levels in the (cross-border) intermediated chains have resulted in costly problems at the expense of shareholders, which are not solved by current regulatory initiatives. Blockchain technology can address the main problems with the current intermediated proxy voting and engagement systems and facilitate the two largest needs in the intermediated chains today, namely i) the identification of shareholders by issuers and, ii) the end-to-end confirmation that the votes are exercised by the beneficial owners and are correctly included in the voting outcomes. Moreover, blockchains have the potential to solve pressing issues in the shareholder stewardship debate, for instance by increasing engagement between shareholders and companies on voting items that (potentially) receive large dissent rates, and making more transparent the role of proxy advisors in institutional shareholder voting decisions. However, because of the involvement of many intermediaries that may see in the introduction of blockchain a disruption of their existing business models, it is expected that reform may take a while in many markets, particularly without any serious harmonisation efforts. Consequently, involvement of regulators is key to achieving the full potential of shareholder voting and engagement using blockchains

The AGM in Europe: Closing the gap between theory and practice

Corporate law presumes that the Annual General Meeting of shareholders (‘AGM’) plays a pivotal role in mitigating agency problems, but its functioning is subject to fierce criticism. This includes shareholder absenteeism, sidestepping by large shareholders and lack of dialogue. Some experts call AGMs ‘dull rituals’ that are ‘obsolete’, whilst others advocate enhanced shareholder rights. The European Commission is clearly in favour of shareholder empowerment with its 2014 proposal to amend the Shareholder Rights Directive (Directive 2007/36/EC) including a European Say on Pay, which was formally adopted in spring 2017 as Directive (EU) 2017/828. The conflicting viewpoints raise extremely important, but unanswered questions and extensive research to explore the functioning of the AGM in practice is lacking, making this book extremely relevant. This book combines empirical legal and economic research to study the role of AGMs in Europe in seven European Member States, finally shedding light on an under-studied subject; the determinants of shareholder participation. The results show, inter alia, that in contrast to what economic theory suggests, a substantial and increasing number of small shareholders participate in AGMs and that legal rules can influence shareholder participation. Nonetheless, AGMs can still be improved and therefore this book provides some clear policy implications

The AGM in Europe: Theory and practice of shareholder behaviour

The Annual General Meeting of Shareholders (‘AGM’) is widely considered as playing a vital and pivotal role in the corporate governance framework in business across Europe, but issues such as shareholder absenteeism and a lack of internal dialogue mean that the AGM’s effectiveness in company decision making is often called into question. Exploring a range of complex issues in detail including shareholder rights, voting procedures and corporate ownership structures, Anne Lafarre explores businesses use of AGMs in seven different national contexts, highlighting the legal and business policy contexts in the UK, Ireland, the Netherlands, Germany, Austria, France and Belgium. Drawing on a range of empirical legal and economic research to study the actual role of the AGM today, she closely analyses turnout rates in addition to voter behaviours, offering readers concrete policy recommendations aimed at closing the gap between theory and practice on this issue. This study presents an extensive analysis of the needs and requirements of shareholders to participate in AGMs in a twenty first century business context