THE EUROPEAN CONFEDERATION OF DIRECTORS ASSOCIATIONS - AVENUE DES ARTS 41 - BRUSSELS 1040THE EUROPEAN CONFEDERATION OF DIRECTORS ASSOCIATIONS - AVENUE DES ARTS 41 B BRUSSELS Hearing European Parliament Shareholders’ rights Directive By: Prof.dr.Lutgart Van den Berghe ecoDa & GUBERNA 2 December 2014

THE EUROPEAN CONFEDERATION OF DIRECTORS ASSOCIATIONS - AVENUE DES ARTS 41 - BRUSSELS 1040 The SH rights directive : – Wants to improve corporate governance – By increasing the rights & duties of shareholders as corporate monitors – While shifting key decision-making powers away from the Board of Directors (implicit mistrust of boards?) Will this effectively work??? Will this be sufficient? – Without attention for the great heterogeneity in shareholder models throughout Europe – Without really solving the barriers of the dispersed shareholding model of the listed companies THE EUROPEAN CONFEDERATION OF DIRECTORS ASSOCIATIONS - AVENUE DES ARTS 41 B BRUSSELS

THE EUROPEAN CONFEDERATION OF DIRECTORS ASSOCIATIONS - AVENUE DES ARTS 41 - BRUSSELS 1040 Barriers of the dispersed shareholding model? Challenge n°1: inactive/passive shareholders do not perform a monitoring role as assumed – Will the SH Directive change this situation? Can inactive shareholders become the micro-managers this Directive implies? What remedies are possible? More attention for shareholder duties & transparency  Incentives for active monitoring?  Giving more rights to nominate/dismiss (independent) directors  Allowing ‘acting in concert’ in case of...? THE EUROPEAN CONFEDERATION OF DIRECTORS ASSOCIATIONS - AVENUE DES ARTS 41 B BRUSSELS

THE EUROPEAN CONFEDERATION OF DIRECTORS ASSOCIATIONS - AVENUE DES ARTS 41 - BRUSSELS 1040 Barriers of the dispersed shareholding model? Challenge n°2: many SH are short-term oriented – Will the SH Directive change this situation? What are possible remedies?  Incentives for long-term shareholders (SH rights/Div) Quid business model of the stock exchange? More obligations for Asset Managers (and Institutional Investors) to disclose their investment strategy More accountability for proxy advisors Quid self-regulation or hard law? Minimal condition of strict monitoring! THE EUROPEAN CONFEDERATION OF DIRECTORS ASSOCIATIONS - AVENUE DES ARTS 41 B BRUSSELS

THE EUROPEAN CONFEDERATION OF DIRECTORS ASSOCIATIONS - AVENUE DES ARTS 41 - BRUSSELS 1040 Barriers of the dispersed shareholding model? Challenge n°3: the complex investment chain – Will the SH Directive change this situation? What remedies are realistic? Transparency as a first step Making institutional investors & asset managers more accountable towards their customers/final owners  BUT can final owners really become monitors of such shareholder policy? THE EUROPEAN CONFEDERATION OF DIRECTORS ASSOCIATIONS - AVENUE DES ARTS 41 B BRUSSELS

THE EUROPEAN CONFEDERATION OF DIRECTORS ASSOCIATIONS - AVENUE DES ARTS 41 - BRUSSELS 1040 Other relevant shareholder models? O bservation 1: the dispersed shareholding model is by far not the dominant form of listed companies, throughout the EU Observation 2: assuming that institutional shareholders are the most important shareholder group in the EU is not correct either => Challenge n°4: controlling shareholders may pose the opposite challenge: abusing their monitoring power and insider position Correct to focus attention in SH Directive on the downsides of both types of governance model THE EUROPEAN CONFEDERATION OF DIRECTORS ASSOCIATIONS - AVENUE DES ARTS 41 B BRUSSELS

THE EUROPEAN CONFEDERATION OF DIRECTORS ASSOCIATIONS - AVENUE DES ARTS 41 - BRUSSELS 1040 Barriers of the controlling shareholder model? What are possible remedies? Sufficient independent directors in the board and board committees to guarantee the focus on the corporate interest  Quid group governance recommendations? More attention for related parties transactions  However, be aware of regulatory and especially business inefficiencies of the proposed measures! THE EUROPEAN CONFEDERATION OF DIRECTORS ASSOCIATIONS - AVENUE DES ARTS 41 B BRUSSELS

THE EUROPEAN CONFEDERATION OF DIRECTORS ASSOCIATIONS - AVENUE DES ARTS 41 - BRUSSELS 1040 More attention for the monitoring role of an ‘effective’ Board of Directors Advantage 1: legal duty to focus on the corporate interest Advantage 2: in-depth knowledge of the business, its context and operations Conditions: Professional directors (well educated and critically evaluated) Guaranteeing independence of board decision-making Effectively monitored by active shareholders, who have explicit rights as to director nomination, remuneration and dismissal THE EUROPEAN CONFEDERATION OF DIRECTORS ASSOCIATIONS - AVENUE DES ARTS 41 B BRUSSELS

THE EUROPEAN CONFEDERATION OF DIRECTORS ASSOCIATIONS - AVENUE DES ARTS 41 - BRUSSELS 1040 ecoDa The European Voice of Directors Thank you