A Sustainable Takeover Regime? The Potential Reform of the Takeover Directive in a Sustainable Development Perspective
European Company Law, 2012
Posted: 3 Jul 2012 Last revised: 14 Jul 2012
Date Written: July 3, 2012
As an overarching goal of the European Union we find sustainable development, the achievement of economic development and social justice within the non-negotiable ecological limits of our planet. While we have little hope of achieving this overarching goal without the contribution of companies, the contribution of companies is restricted by a number of barriers, notably that of shareholder primacy and the perceived overarching goal of maximising shareholder profit. As a reform of the EU Takeover Directive is currently being considered, a critical assessment of the Directive’s contribution to the overarching goal of sustainable development is called for.
This paper draws on earlier work on the Takeover Directive which evaluated the significance of the Directive for companies, for shareholders and for the overarching goal of sustainable development. The analysis forming the basis for the evaluation concentrated on the effect three main rules of the Directive: the board neutrality rule, the break-through rule and the mandatory bid rule, would have on the boards of the target companies, the target shareholders and the bidder. The conclusion was firstly that the Directive is not a success even on its on premises, with its aim to stimulate takeovers and thereby the market for corporate control. Secondly, the Directive also seems to be a failure in terms of its express goal of enhancing the European economy. Thirdly, which is developed further in this paper, the contribution of the Directive to the overarching goal of sustainable development is undoubtedly negative and as such a contravention of the Treaty obligation to include environmental protection requirements in all policies and area. The Takeover Directive intends to strengthen the European economic development through the ‘market for corporate control’ meant to make European business more efficient. However, to the extent it has any effect at all, the Directive promotes the shareholder primacy drive and narrow, short-term profit maximisation which forms a barrier to companies’ long-term contribution to sustainable development. The Directive also serves to undermine potentially positive effects of socially responsible investment and the greening of business.
The paper concludes with reflections on how the Directive on its terms could be reformed to perhaps contribute to sustainable development and most importantly, what should be done beyond the Directive – ending with a call for a sustainable reform of EU company and securities law in general.
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