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
27 Pages Posted: 3 Dec 2014
Date Written: October 2013
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: Suggested Citation