Short-Termism in the European Union
Posted: 1 Nov 2014 Last revised: 9 Jun 2016
Date Written: April 8, 2016
The 2007–08 global financial crisis gave rise to an extensive debate in the United States (US) on short-termism and its influence on agency relationships, incentives, and fiduciary duties. This debate and the consecutive legal creativity of US policymakers display spillover effects and constitute an influential source of inspiration for politicians and lawmakers in foreign jurisdictions. The European Commission currently proposes to amend the Shareholder Rights Directive (2007/36/EC) to counterbalance the financial sector’s alleged triumph over industry. The initiative is motivated primarily by traditional Anglo-American arguments, and contains provisions first introduced through Dodd-Frank. This Article explores the proposal and its justifications, followed by an evaluation of the suggested regulatory amendments. It highlights the influence of American debate and policymaking abroad, and argues that the short-termism concept, despite its contemporary authority in the post financial crisis era on both sides of the Atlantic, is misguided, and even more so in the European context. The Article concludes that the proposed amendments should not be expected to solve short-termism problems or alter the corporate governance system in any significant way.
Keywords: Short-termism, Shareholder Rights Directive, institutional investors
JEL Classification: G30, G38, K22
Suggested Citation: Suggested Citation