Subsidiarity and Proportionality and the Commission's Relations with national parliaments - European Scrutiny Committee Contents


2 Shareholder rights

Committee's assessment Legally important
Committee's decisionNot cleared from scrutiny; further information requested; drawn to the attention of the Business, Innovation and Skills Committee
Document detailsDirective amending Directive 2007/36 as regards the encouragement of long-term shareholder engagement and Directive 2013/34 as regards certain elements of the corporate governance statement
Legal baseArticles 50 and 114 TFEU; ordinary legislative procedure; QMV
DepartmentBusiness, Innovation and Skills
Document numbers(35957), 8847/14 + ADDs 1-3, COM(14) 213

Summary and Committee's conclusions

2.1 This proposal amends the existing Shareholders' Rights Directive (2007/36) by introducing new provisions intended to facilitate the exercise of shareholders' rights, give them a greater say over directors' remuneration and increase transparency in respect of: the strategies of institutional investors and asset managers; the activities of proxy advisors; directors' remuneration; and related party transactions. Further details are set out in our Report of 4 June 2014.

2.2 When we previously considered this proposal last summer we noted that the Government was broadly supportive of the proposal; shared its concerns that the proposal regulated matters currently covered by the voluntary stewardship code and the code of conduct for proxy advisors; and looked forward to the Government's further consideration in relation to charging by intermediaries, related party transactions and the Commission's power to adopt subordinate legislation.

2.3 The Minister for Employment Relations and Consumer Affairs and Minister for Women and Equalities (Jo Swinson) now updates the Committee.

2.4 We are grateful for the update from the Minister which indicates that all the concerns raised by the Government on the original draft have been addressed save for that concerning the Commission's power to adopt subordinate legislation. This proposal now reflects the UK's approach to Corporate Governance.

2.5 As the proposal is still under discussion at working group level, we should be grateful for a further update on this last mentioned issue and any further amendments to the text in good time before any prospective general approach.

2.6 In the meantime we hold this matter under scrutiny and draw it to the attention of the Business, Innovation and Skills Committee.

Full details of the documents: Proposal for a Directive amending Directive 2007/36/EC as regards the encouragement of long-term shareholder engagement and Directive 2013/34/EU as regards certain elements of the corporate governance statement (35957), 8847/14 + ADDs 1-3, COM(14) 213.

The Minister's letter of 18 December 2014

2.7 The Minister updates the Committee on the matters of concern:

    "The measures around transparency of institutional investors and asset managers, which in the UK are mainly subject to the Stewardship Code, are far less prescriptive now that a 'comply or explain' approach applies throughout. Requirements on proxy advisers have also been mitigated to take into account the Code of Principles, developed by the sector, following an analysis and report by the European Securities and Markets Authority (ESMA).

    "Measures on the transparency of fees charged by intermediaries have been amended, so that the UK regime, where these are not allowed, will not be impacted.

    "With regards to related party transactions, the presidency has proposed a text focused more on principles than details, to ensure agreement from member states. The latest draft has introduced greater flexibility, therefore limited impact on the UK Listing Rules.

    "We have clarified that the final compromise text will need to address any relevant requirements. Any remaining aspects will be left to member states' authority and addressed, as appropriate, during implementation."

2.8 She assesses the progress of the negotiation:

    "Overall, I am satisfied that the proposal strikes the right balance between legislative requirements and best practice, a confirmation that the UK approach to Corporate Governance is a model of excellence."

Previous Reports

First Report HC 219-i (2014-15), chapter 4, (4 June 2014).





 
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