A critical analysis of Directive 2017/828 and its effect on shareholders’ rights

Abstract

Shareholders’ rights have been the focus of discussion for the good part of the 21st century. With the introduction of Directive 2017/828 as regards the encouragement of long-term shareholder engagement, the Commission continued to build on the previous directive, Directive 2007/36, in its mission to continue to arm shareholders with rights. However, this new directive went a step further and chose to also bestow upon shareholders a set of duties and bigger involvement. Shareholders have been empowered to have right to approve executive pay and act as oversight on related party transactions. Furthermore, the Directive imposes on institutional investors an obligation to make public their engagement policy in an effort to increase shareholder engagement. Additionally, it also contains measures relating to proxy advisors and asset managers. The aim of the directive is to increase long term engagement of shareholders instead of focusing on short-term financial gain. The financial crisis of 2008 serves as testimony to the dangerous of short-termism and this Directive is the EU legislator’s attempt at fighting it. This dissertation will also attempt to trace the development of the theory of corporate governance within the EU. While for years it had focused on shareholder activism, through the Shareholder Rights Directive II, a shift can be observed towards shareholder engagement. While the EU should be lauded for its efforts in improving corporate governance, the Directive is not without its shortcomings. These will also be addressed within the dissertation.