Directors' Duties to Engage Shareholders

Published in Hanne Birkmose, Mette Neville & Karsten Engsig Sørensen (eds.), Boards of directors in European companies – reshaping and harmonising their organisation and duties, Kluwer Law International 2013

Nordic & European Company Law Working Paper No. 14-05

27 Pages Posted: 3 Dec 2014

See all articles by Hanne S. Birkmose

Hanne S. Birkmose

Aarhus University - Department of Law, Business and Social Sciences

Date Written: October 2013

Abstract

The European Commission sees shareholder engagement as a cornerstone of the corporate governance model for listed companies. Shareholder engagement can to some extent be supported by legislation at national and EU levels. Some legislation is already in place, such as the Shareholders’ Rights Directive, the Transparency Directive and the requirement to make a corporate governance statement available to shareholders. But more needs to be done, and in the 2012 Action Plan the Commission sets out several initiatives that will strengthen shareholder engagement.

However, the Commission makes it clear that the responsibility for good corporate governance is first and foremost that of each company. Consequently, the boards of directors of European companies should themselves consider how to ensure good corporate governance. As shareholder engagement is a key factor of corporate governance, boards should specifically consider what can be done to enhance shareholder engagement. Board duties in this respect are partly defined by law, but in some areas how to comply with the overall duty to ensure good corporate governance is less clear. Given the heterogeneity of companies, the board of directors of each company should consider what is necessary to enhance shareholder engagement in their individual company. However, boards should not only consider the potential benefits of enhanced engagement but also its costs. In any case, the increased awareness of boards of their role in engaging shareholders in corporate governance issues will contribute positively to good corporate governance in European companies.

Keywords: Shareholder engagement

JEL Classification: K22

Suggested Citation

Birkmose, Hanne Søndergaard, Directors' Duties to Engage Shareholders (October 2013). Published in Hanne Birkmose, Mette Neville & Karsten Engsig Sørensen (eds.), Boards of directors in European companies – reshaping and harmonising their organisation and duties, Kluwer Law International 2013, Nordic & European Company Law Working Paper No. 14-05, Available at SSRN: https://ssrn.com/abstract=2533382

Hanne Søndergaard Birkmose (Contact Author)

Aarhus University - Department of Law, Business and Social Sciences ( email )

Bartholins Allé 16, Building 1411, Room 255
DK-8000 Aarhus C
United States

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