Learning from the UK in the Proposed Shareholders’ Rights Directive 2014? European Corporate Governance Regulation from a UK Perspective

Abstract

This article examines the driving forces for European Corporate Governance Regulation (ECGR) and argues that ECGR has moved from a gradual bottom-up approach based on learning from diversity to an approach that blends into harmonised capital markets regulation at EU level. The gradual bottom-up approach in ECGR was largely due to inconclusive debates regarding the value of comparative corporate governance and its impact on market integration. However, with the advent of overt public interest rhetoric, that has paved the way for direct corporate governance regulation of the financial sector post global financial crisis. Elements of corporate governance are now being regarded as suitable for hard harmonised legislation, such as in shareholders’ say on pay and (perhaps) the regulation of aspects of shareholder engagement. This article examines the UK’s role as norm-pioneer in the developments in ECGR and argues the EU developments on say on pay is still largely couched in the vein of bottom-up development maturing into hard law, and the UK’s role as a norm-providing leader in that area has had significant influence. Although the UK’s say on pay norms are largely responsive to domestic concerns, the UK’s international influence on this issue has been possible because of ‘fit’ conditions at both the micro and macro levels in many jurisdictions. On shareholder engagement, the UK’s development of its stewardship concept is largely rooted in its domestic context although the concept has been exported to other jurisdictions. The UK’s stewardship concept appears ostensibly to have influenced ECGR in the European Commission’s proposals on regulating shareholder engagement. However, the Commission’s proposal has arguably upstaged the UK’s norm-pioneering leadership as the proposal is more akin to a form of harmonised capital markets regulation. ECGR can be used for extending the scope of securities regulation harmonisation. It is uncertain if such a development is indeed optimal. There are different micro and macro conditions in the capital markets of Member States and it may be inappropriate at this point in time to standardise the norm of shareholder engagement.

Keywords: Shareholders' Rights Directive, shareholder engagement, Stewardship Code, say on pay