Shareholders’ Rights Directive (SRD) Review: public consultation – a BusinessEurope position paper

Introduction

BusinessEurope wishes to provide input on the Commission’s consultation on the review of the Shareholders Rights Directive (SRD), which is a central component of the EU’s corporate governance framework.

Overall, SRD has reduced fragmentation in key areas, increased clarity regarding voting rights and shareholder entitlements, facilitated shareholder identification and engagement, and strengthened long-term investor-company relationships. More precisely, SRD I contributed to the harmonisation and establishment of minimum shareholder rights standards. SRD II added further elements, notably in remuneration (say on pay), related-party transactions (RPTs), shareholder identification, institutional investor engagement, and proxy advisors.

The SRD framework has been overall well-functioning, and European businesses have made significant efforts to comply with the requirements, to integrate the new rules into their operations, and have largely succeeded in doing so. Without undermining the efforts made by European businesses to digest and integrate the SRD framework, and under the prism of the simplification and burden reduction agenda of the Commission, we are willing to contribute to the Commission’s effort to review the SRD framework. Any updates to this framework should be cautious and aim to reduce administrative and financial burdens, inefficiencies, be evidence-based, and well-targeted to address specific identified problems. In this context, we see a potential scope for improvement under the current SRD review in targeted areas of the Directive, such as the need to further regulate proxy advisors and to strengthen the overall reliability and comparability of the information and analysis underpinning shareholder decision-making, including through appropriate transparency, controls, and independent scrutiny mechanisms where market practices materially influence votes.

This paper, therefore, outlines our main messages regarding the SRD framework, as well as detailed replies to the Commission online questionnaire, indicating where targeted changes are necessary and what direction such changes should take.