EU wants a critical mass of shareholders taking engagement seriously

Long-awaited Green Paper on Corporate Governance from European Commission

Published on responsible investor.com, by Daniel Brooksbank, April 5, 2011.

… Shareholder oversight is one of the checks and balances in the corporate governance system and is an essential tool to hold management accountable for its decisions and actions,” the Commission says in documents accompanying its new Green Paper on Corporate Governance.

“The purpose of this consultation is to find ways to encourage the presence of a critical mass of shareholders willing to take their engagement responsibilities seriously.” 

It has identified boosting shareholders’ involvement in corporate governance and their interest in sustainable returns and long term performance as key elements in the long-awaited consultation paper published today.

“We need company boards to be more effective and shareholders to fully assume their responsibilities,” said Internal Markets Commissioner Michel Barnier.

The 21-page document looks at the fundamental relationship between institutional asset owners and fund managers.

The Commission states its belief that “short-term incentives in asset management contracts may contribute significantly to asset managers’ short-termism, which probably has an impact on shareholder apathy” … (full text).

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