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Mallin: Corporate Governance 2e

Chapter 6

Share ownership

Page 81 of book

The Office of National Statistics (ONS) released the share ownership survey for 2006 in the summer of 2007.  Once more the ownership by the 'Overseas' category has increased.  The full survey is accessible at:
www.statistics.gov.uk/STATBASE/Product.asp?vlnk=930

Voting

Page 87 of book

The Shareholder Voting Working Group (SVWG), chaired by Paul Myners, issued its fourth report in July 2007.  The report states that voting levels have risen to over 60% up from 50% some three years ago.

The report details the various impediments to voting, highlighting the complexity of the voting system, and making recommendations on a number of areas to help improve the situation and remedy the problem of 'lost' votes.  The report recommends that the voting system should be more efficient and transparent and specifically highlights that institutional shareholders could be doing more to try to ensure that their votes were appropriately recorded.  The report cited the Combined Code on Corporate Governance (2006) which states:
"institutional shareholders should take steps to ensure their voting instructions are translated into practice" (supporting principle to Principle E3).

Voting

Page 82 of book

There have been a number of developments aimed at enhancing corporate governance in the EU.  The Commission Action Plan on modernising company law and enhancing corporate governance in the European Union has set the improvement of the rights of shareholders of companies across the Member States as a priority.  After two public consultations, the Commission proposed early in 2006 a directive which was formally adopted in June 2007.  The Directive has to be incorporated into Member States' laws by summer 2009 and "will ensure in particular that shareholders have timely access to the complete information relevant to general meetings and facilitates the exercise of voting rights by proxy. Furthermore, the directive provides for the replacement of share blocking and related practices through a record date system".

In June 2007, the Commission published an external study on proportionality between capital and control in EU listed companies.  Proportionality is the relationship between capital and control ('one share, one vote').  The study, carried out by Institutional Shareholder Services Europe (ISS Europe), the European Corporate Governance Institute (ECGI) and the law firm Shearman & Sterling LLP, found that "on the basis of the academic research available, there is no conclusive evidence of a causal link between deviations from the proportionality principle and either the economic performance of listed companies or their governance. However, there is some evidence that investors perceive these mechanisms negatively and consider more transparency would be helpful in making investment decisions."

ec.europa.eu/internal_market/company/news/index_en.htm

Influence of institutional investors

Page 86 of book

The International Corporate Governance Network (ICGN) issued its ICGN Statement of Principles on Institutional Shareholder Responsibilities (2007)

The statement sets out the ICGN's view of the responsibilities of institutional shareholders both in relation to their external role as owners of company equity, and also in relation to their internal governance.  Both these areas are of interest to beneficiaries and other stakeholders.  Ownership of equity carries important responsibilities, and the rights attached to share ownership must be exercised responsibly.  Responsible ownership requires high standards of transparency, probity and care on the part of institutions.

The statement is accessible at:
www.icgn.org/organisation/documents/src/Statement%20on%20Shareholder%20Responsibilities%202007.pdf