EU Shareholder Rights Directive

The European Parliament’s legal committee voted this May to extend voting rights for ‘long-term’ shareholders.

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The committee approved draft legislation on 7 May to amend the EU Shareholder Rights Directive on issues such as transparency on executive remuneration, additional voting rights and country-by-country tax reporting.

The aims of the draft law are around improving levels of transparency while also looking at creating a long-term commitment between shareholders and companies.

Additional voting rights

The committee wants to increase the number of long-term shareholders with the aim to increase the likelihood of Boards being held to account. This comes with suggested ways to reward long-term shareholders, including mechanisms such as additional voting rights, loyalty dividends or shares, and tax incentives. These mechanisms would apply to those with a minimum of two years investment.

Say on pay

A clause has been added that requires a shareholder vote on remuneration policies at least every three years. Remuneration policies should now house key information, such as criteria for fixed or variable remuneration, however, the committee removed the requirement that the remuneration policy must state maximum remuneration. 

Tax Reporting

To improve tax transparency, a requirement has been inserted to advise that all ‘large undertakings and public-interest entities’ will publish information around profit and taxes country-by-country.

These changes were agreed at a vote and will now proceed towards a first reading. They have, however, already been put in place in some member states, with France introducing the Florange Law and Italy giving double voting rights to shareholders of more than two years