With the next proxy season fast approaching the Shareholder Rights Directive (SRD) is top of mind. Extensive disclosure obligations are part of the second iteration and reliable information is key to ensuring requirements are met.
With the EU directive requiring transposition into domestic law in all Member States by September 2020, companies have a limited window to comply with the new requirements and ensure they have aligned their company's structure in a way that encourages shareholder engagement long term.
The directive's main aims involve long-term thinking and practices, transparency and increased engagement. However don't think that this doesn't also have implications for institutional investors, asset managers and proxy advisors.
The new regime involves institutional investors and asset managers having to disclose their engagement policies, and intermediaries to make sure they facilitate the transmition of information to shareholders in a transparent manner. This includes publicly disclosing what they charge for these services.
In short, the SRD II is aimed at reducing short-termism and excessive risk taking by EU companies, plus increasing transparency all-round.
The problem of pay
With executive pay being heavily scrutinized over the past few years, it comes as no surprise that SRD II calls for change to pay disclosures. Creating a better link between pay and performance of company directors, and bringing an end to short-term targets as a measure of success. With this aim brings requirements of providing greater detail and information to support pay policies, including what metrics are being used to measure executive performance. Decisions will have to be rationalized and justified in detail, and without data and facts showing exactly why these decisions were made, companies put themselves at risk of non-compliance.
For companies and investors to meet the requirements of SRD II and as they become effective in the 2020 proxy season (and for intermediaries to be fully compliant) there is no doubt that they need access to accurate and reliable data. CGLytics is already helping many companies, investors and intermediaries get up to speed with meeting obligations, including providing Glass Lewis with data for their Proxy Papers, and you can be fully prepared too.
If you would like to know more about the impact SRD II will have on your company or firm, click here to download the full article.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.