Tuesday, 25 August 2015

One share, one vote

I've only followed the progress of the Shareholder Rights Directive at a distance, but it strikes me that    it provides a fairly important indicator that something is up. The abandonment of the 'One share, one vote' principle, and the encouragement of alternative structures that actively undermine it, seem to me to be one of the most dramatic shifts in direction in corporate governance policy for some time.

It wasn't that long ago that Charlie McCreevey was trying to push through one share one vote, now the SRD is leading in completely the opposite direction.

I personally don't have a particularly strong view either way on this one. From memory McCreevey's efforts were stalled at least in part because the EC's own research could find no evidence for the economic benefits  of one share one vote (though I have no doubt that other factors were at play in the decision). That seems pretty important to me and added with the wider issues of limited shareholder commitment I lean towards favouring loyalty rewards, but I know most investors hate this kind of thing and even vote against it.

But my views aside, the about turn seems pretty significant. The optimist in me wants to see this as a willingness to think a bit more deeply about governance and the fact that the extension of shareholder "rights" is not comparable with political enfranchisement when the "electorate" is largely comprised of often conflicted intermediaries. It may be a further sign of disillusionment with the US/UK model of corporate governance, and almost certainly reflects the UK's diminished status when lobbying in Europe over these kinds of issues. Maybe, even less positively, it reflects lobbying from corporates who don't want activist funds breathing down their necks.
Whatever the mix of factors is, something important in corporate governance has happened here, and it leaves the UK on the periphery again. Perhaps this a good time to reflect on whether this is just corporatist Europeans failing to understand why our system is superior, or we're just making our arguments badly or if, maybe, we need to rethink our own assumptions.  

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