REPORT: the 2020 Shareholder Meetings harmed Shareholder Rights | | |
The annual general meeting (AGM) is the cornerstone of shareholder democracy and an essential part of sound corporate governance. Not only are AGMs the place where shareholders get to vote on key decisions, it is also the only time board members and management are held to account, having to answer directly to their shareholders and report on their performance and decisions. In 2020 the Corona pandemic and the ensuing stringent limitations to gatherings of people and freedom of movement, had a dramatic impact on AGMs across Europe and the world. Together with its German Member organisation DSW, BETTER FINANCE investigated how selected EU Member States reacted to the Corona pandemic with regard to the general meetings of listed companies and how the measures taken in each case have been perceived by shareholders. Emergency laws in most EU member states prohibited the physical attendance to general meetings. In response, governments decided to relax the rules governing the participation in general meetings, allowing companies to hold purely virtual general meetings, leading to an unprecedented rise in virtual or totally closed-door AGMs across the EU. In most cases this has resulted, one way or another, in an infringement of shareholders’ rights. A survey conducted among individual shareholders and their representative organisations throughout the EU indicates that shareholders had mixed experiences, citing both advantages and weaknesses for both traditional on-site AGMs and their virtual counterparts. While shareholders shared concerns that conventional on-site meetings are not easily accessible for non-residents, involve costs and are time-consuming, they agreed that physical meetings give individual, non-professional shareholders a unique opportunity for “in-person” direct interaction with both management and other shareholders. Such meetings are also very transparent, with questions from shareholders and answers from the board being heard by everyone in the room. Virtual-only meetings, on the other hand, are not conducive to transparent and open discussions and, to some extent, reduce shareholders’ rights to speak and ask questions, in particular during the meetings. But they also have their advantages such as the fact that they can be accessed from anywhere in the world, have a lower environmental impact, are less costly and time-consuming for shareholders and can be recorded for future reference. It would seem, from the mixed responses to the survey, that hybrid AGMs would be the best way forward, combining the best of both worlds by incorporating the positive aspects of both virtual and physical meetings and removing the barriers to the exercise of shareholders’ rights that exist in both models. To achieve this, lessons from the 2020 AGM season need to be drawn and the weaknesses of the respective formats addressed. Further reading: BETTER FINANCE - DSW Study on the 2020 Virtual Shareholder Meetings in the EU: "The Future of General Shareholder Meetings" Press Release: "The 2020 shareholder meetings harmed shareholder rights and often severely" | |
Uneven Competition Hampers EU Long-Term Investment Funds from Taking Off | | |
With merely 22 active funds, of which just a handful are marketed and distributed to individual, non-professional (“retail”) investors, the EU Long-Term Investment Funds (ELTIF) market is still struggling to develop more than five years after its launch. The uptake of ELTIFs by investors is hampered by similar but more attractive domestic labels, a lack of public promotion, a shortage of “affluent” investors and more stringent investment rules compared to other funds of the same type. Research by BETTER FINANCE into the underdeveloped EU market for long-term investment funds set out to identify what deterred investors from pooling capital into this safe, long-term investment vehicle and what can be done to ensure that this fund label also turns into a success story, like the UCITS. The ELTIF was created to address the lack of available financing for private equity, infrastructure, or sustainable projects (such as renewable energy, climate change or eco-friendly technologies). Such projects, by their nature, are far less liquid than other investments and require large-scale financing and “patient capital” (long-term commitments). Creating a safe vehicle for investments in riskier, illiquid assets at EU level is very difficult, especially since some national laws “compete” with each other through various types of tax-incentivised private equity funds. Besides the challenges of setting up such a vehicle, another factor affecting the development of the ELTIF market is simply the lack of an “affluent “retail investor base, due to low financial literacy, awareness and trust in capital markets . Finally, the more stringent investment rules for ELTIFs, and the lack of tax incentives, can deter even asset managers from setting up such long-term funds. Many EU labels face uneven competition from domestic products at national level, putting cross-border investments at a disadvantage and holding back the creation of a true internal market for capital and financial services. EU Member States must – at the very least – not hamper the uptake of EU-regulated investment vehicles, such as the ELTIF, and grant them the same treatment. More information: BETTER FINANCE ELTIF Research & Policy Report Press Release: "Ensure a Level Playing Field for ELTIFs to Take Off" | |
Coronavirus: EU agrees to rules to make it easier for firms to raise capital through the ‘EU Recovery Prospectus' | | |
In December 2020, the Council and European Parliament reached an agreement on the amendments to the Prospectus Regulation proposed by the European Commisison on 24 July 2020, as part of the Capital Markets Recovery Package in response to the Covid19-induced crisis. The amended rules will introduce a new shorter prospectus, known as the EU Recovery Prospectus, and will make it easier for firms to raise capital. Mairead McGuinness, Commissioner for Financial Services, Financial Stability and the Capital Markets Union welcomes the agreement "that will help companies recover from the sustained economic shock of the pandemic. [The] targeted amendments to the Prospectus Regulation are a clear signal that the EU can adapt quickly to evolving circumstances in order to support the real economy. The agreement strikes the right balance between encouraging financing through capital markets while maintaining a high level of investor protection. It will enable companies to issue capital more easily and reduce their debt-to-equity ratios, helping them stay solvent and resilient.” The EU Recovery Prospectus should: facilitate the recapitalisation of affected companies be easier to produce for issuers, easier to read for investors and easier to scrutinise for national competent authorities cut down the length of prospectuses from hundreds of pages to just 30 More information: European Commission Coronavirus response and Capital Markets Recovery Package: "Making capital markets work for Europe's recovery" | |
International Investors’ Conference - 'European Capital Markets’ Union & the new Green Deal' | | |
On 2 December 2020 BETTER FINANCE and its German member organization DSW, the leading shareholder association in Germany, held a Virtual International Conference on “European Capital Markets’ Union & the new Green Deal”. The conference could count on interventions by high-level keynote speakers, such as Verena Ross from the European Securities and Markets Authority (ESMA) in Paris, Mairead McGuinness, European Commissioner for Financial Stability, Financial Services and the Capital Markets Union and Didier Reynders EU-Commissioner at DG Justice from Brussels. Commissioner McGuinness stressed that the Coronavirus pandemic could not be used to delay European sustainability efforts and that the European Commission, on the contrary, is pursuing a sustainable recovery. She added that an integrated Capital Markets Union (CMU) will be pivotal to the success of the EU Green Deal and with recovery in the aftermath of the Covid-19 crisis. Empowered individual investors, who can invest sustainably, according to Ms McGuinness, need to be at the centre of the CMU. To this end it will be crucial to increase individual investor participation, strengthen investor protection and make it easier for shareholders to have their say across borders. Ultimately, it is the choices of individual investors that will determine how capital is invested. The Commissioner also brought up the European Commission’s Retail Investment Strategy, that will empower consumers through unbiased advice, clear and comparable product information and higher financial literacy. These efforts will be backed up by a Digital Finance Strategy that can open new channels to mobilise funding for the transition and recovery towards a more inclusive economy. ESMA’s Executive Director, Verena Ross, went into more detail and hailed the EC’s recommendation to create an EU-wide 'single access point' as part of CMU to enable easy and centralised access to comparable financial and non-financial public corporate disclosures as a potential great tool for individual investors! Ms Ross joined the Commissioner in stressing that the further development of an EU Capital Markets Union has never been more pressing. Both the CMU and the EU Green Deal require mobilisation of public and private capital, essential to the recovery following the Covid-19 pandemic and to support the transition towards sustainable growth. In turn, the CMU can’t be successful without retail investor participation and their trust in the integrity of capital markets. This can only be achieved by disclosure harmonisation and greater investor protection, addressing high costs and their negative effect on returns, reducing cross-border barriers to investments, and achieving higher financial literacy among EU Citizens as savers and investors. These views were echoed by European Commissioner for Justice, Didier Reynders, who linked the implementation of the New Consumer Agenda, to the need to empower finance consumers in the green and digital transitions. More information: Conference Programme | |
Greek individual investors join BETTER FINANCE via HELINAS | | |
BETTER FINANCE is pleased to announce the affiliation of a new member organisation in Greece. HELINAS, the Hellenic Investors Association, is a Non-Governmental Organisation established in 2017 in Athens that is working to uphold investor rights. It is also the leader in shareholder activism in Greece and represents individual and institutional investors in General Assemblies of listed companies through proxy voting and stewardship services. HELINAS joined forces with BETTER FINANCE in early December 2020 to ensure the voices of Greek individual investors and shareholders are heard in Brussels and to ensure that the interests of Greek savers and investors are not overlooked at the European level. “By joining BETTER FINANCE, HELINAS ensures that Greek citizens as individual investors regain their rightful place in the European policy debates after a prolonged absence, turning the page on a decade of economic and social crisis”, Guillaume Prache, Managing Director of BETTER FINANCE, declared. More information: Press Release: "Greek individual investors join BETTER FINANCE via HELINAS | |
In Memory of Wilhelm Rasinger - the Champion of Austrian Individual Investors | | |
It is with great sadness that BETTER FINANCE learned on Monday 14 December 2020 that Wilhelm Rasinger, President of the Austrian Association for Investors (Interessenverbandes für Anleger – IVA) passed away. He was a great friend of our organisation and, apart from his close involvement with the European Federation of Investors and Financial Services Users, he was also instrumental in involving IVA with Euroshareholders. He was one of the first members of the BETTER FINANCE family, having joined Euroshareholders from the very beginning. The founder of the Austrian investors' interest group fought many years for the rights of small investors, to improve the shareholder culture in Austria and Europe, and for a functioning Capital Markets Union. Now Wilhelm Rasinger lost his battle against an incurable illness. The 72-year-old father of five leaves a big gap in the Austrian and European capital markets. All members of BETTER FINANCE fondly remember his great insights in all matters financial and the warm welcome BETTER FINANCE enjoyed in Vienna for its General Assembly in 2013. Euroshareholders and BETTER FINANCE send their most sincere and deepest condolences to his family. More information Wiener Zeitung orbituary: "Anlegerschützer Wilhelm Rasinger ist tot" | |
Coming Up | | |
REPORTS First BETTER FINANCE Sustainable Investment Funds Research Report: Are “green” funds really green? How do they perform compared to other investment funds? The answers at the beginning of 2021, watch out for the release! Fifth edition of BETTER FINANCE’s research into Robo Advice: “Robo Advice 5.0: Can Consumers trust Robots?" | |
Season's Greetings | | |
The BETTER FINANCE Team wishes you a better, brighter and safer 2021! | |
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