1. Long-term shareholders’ engagement

2. What is a long-term shareholder?  Sustainabilty = very long term, over generations e.g. family business ownership Importance of succession planning: deserves much more governance attention, given huge fall-out percentages!  Other extreme High frequency trading, Day-trading No owners nor shareHOLDERS No engagement whatsoever Economic role and value-added?  Many shades in-between with different time horizons e.g. private equity, individual, institutional shareholders

3. What is Engagement?  Insider model Very strong engagement and monitoring role Shareholder on the board (owner, industrial shareholder, financial shareholder) Sometimes also ‘represented’ in management (families, private equity) But also challenges Private benefits, related-parties transactions & (potential for) abuse of power Necessitates... Additional attention for the role of independent directors (nomination point of attention in insider model) Additional attention needed for respecting minority rights

4. What is Engagement?  Outsider model, with many nuances Dispersed shareholder model (Very) limited impact of shareholders: issue of free riding Institutional capital: a complex investment chain with numerous parties involved: how to make them responsible for engagement and monitoring ? Blockholding (by institutional investors=outsiders) More monitoring potential But difficulties Engagement depends upon the investment policy (relevance for index fund?) Collective action not straightforward: cost-benefit and potential competition Acting in concert rules may be prohibitive Are solvency regulations still compatible with important investments in equity capital?

5. 17-12-2013 Prof.dr.Lutgart Van den Berghe lutgart.vandenberghe@guberna.be