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What the Shareholders Right Directive II means for investors

What the Shareholders Right Directive II means for investors

08-07-2019 | Insight

An updated regulation regarding shareholder rights and obligations came into force on 9 June 2019. For Robeco, the European Union’s Shareholder Rights Directive II (SRD II) is simply business as usual. Much of the directive makes compulsory what was previously voluntary, however, it could mean large changes for EU institutional clients.

  • Wouter Kuijpers
    Wouter
    Kuijpers
    Senior Counsel Legal Developments
  • Marc Stoffers
    Marc
    Stoffers
    Compliance Officer

Speed read

  • The new directive enhances long-term shareholder engagement
  • SRD II could have a big impact for smaller asset owners in the EU
  • Robeco can help investors to meet the regulations
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SRD II could have significant impact for smaller asset owners or managers who do not have the resources to effect the level of active ownership that the new regulation requires. In this brochure, we explain what it means, the improvements it is set to bring, and the level of service that Robeco can offer in meeting SRD II.

The current Shareholder Rights Directive (SRD I) came into force in 2009. Three years later, the European Commission found evidence that shareholder rights were poorly used; the level of monitoring of EU investee companies, and engagement by asset managers and asset owners, has been often inadequate and were focusing too much on short-term returns.

SRD II addresses this problem in two main ways. Firstly, it enhances long-term engagement between EU listed companies and their shareholders. Secondly, it promotes the alignment of interests between equity asset owners and asset managers, contributing to the responsible stewardship of the assets under management.

It sets five specific requirements:

  • Increase the level and quality of engagement of asset owners and asset managers with their investee companies on contentious issues;
  • Better align executive pay with corporate performance by forcing companies to allow shareholders to vote on remuneration policies;
  • Publicly disclose how an asset manager’s investment decisions contribute to the medium to long-term performance of the companies in which it invests;
  • Facilitate the transmission of cross-border information across the investment chain to ease the identification of shareholders;
  • Increase transparency in the voting process, particularly when proxy advisors (those who vote on an investor’s behalf) are used.

In this brochure we look at these issues in turn, describing what Robeco currently does, and how we can help clients who need to meet the regulations.

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