The Shareholder Rights Directive (SRD) is a European Union directive that aims to strengthen the rights of shareholders in companies listed on EU stock exchanges. It sets out certain requirements and provisions to enhance shareholder engagement, transparency, and corporate governance practices.

Key Matters and Considerations in ESG

Here are some key points about the Shareholder Rights Directive:

– Proxy Voting and Shareholder Identification: The SRD establishes rules to facilitate the exercise of shareholder voting rights, particularly through the use of proxy voting. It aims to ensure that shareholders can participate and vote effectively in general meetings, even if they are unable to attend in person. The directive also requires companies to facilitate the identification of their shareholders.

– Related Party Transactions: The SRD includes provisions to ensure transparency and safeguard shareholder interests in related party transactions. Companies are required to disclose and obtain shareholder approval for significant transactions with related parties, such as company insiders or their close associates.

– Say on Pay: The directive introduces the concept of ”say on pay,” which means that companies are required to provide shareholders with a right to vote on executive remuneration policies and practices. This gives shareholders a voice in determining the compensation of company executives and helps promote accountability and alignment of interests.

– Enhanced Transparency: The SRD promotes transparency by requiring companies to disclose information on their corporate governance practices, including board diversity, remuneration policies, and the exercise of shareholders’ rights. It also encourages greater transparency in relation to the engagement between companies and their shareholders.

– Shareholder Rights Facilitators: The directive introduces the concept of ”shareholder rights facilitators” who act as intermediaries to facilitate the exercise of shareholder rights and improve communication between shareholders and companies. These facilitators can assist shareholders in exercising their voting rights and provide services related to shareholder identification and communication.

– Cross-Border Voting: The SRD aims to facilitate cross-border voting by ensuring that shareholders can exercise their rights regardless of their location within the EU. It includes provisions to streamline the process of cross-border voting and eliminate administrative barriers.

The Shareholder Rights Directive seeks to enhance shareholder engagement, improve transparency, and strengthen corporate governance practices across the EU. It provides a framework for promoting shareholder rights, enabling shareholders to play a more active role in corporate decision-making and oversight. Member states of the EU are required to implement the provisions of the directive into their national legislation.