Funds welcome new EU rights directive

The EU parliament came to an agreement on the directive in a single reading.

EU commissioner for internal market and services, Charlie McCreevy, said: “This agreement moves us one step further towards our goal, which is to ensure that shareholders, no matter where in the EU they reside, have timely access to complete information and simple means to exercise certain rights – notably voting rights – at a distance.”

Swedish pension fund AP2 spokesperson Carl Rosen expressed satisfaction with the agreement. “Every step towards more shareholder influence is welcome. Going forward it will be easier for us to vote in Europe and hopefully it will be easier for foreigners to vote in Sweden as well.”

The directive will see the removal of obstacles pension funds previously had to overcome if they held shares in companies listed in other EU countries.

An example of this was the so-called share blocking, where shareholders were prevented from trading shares for a certain period before the company general meeting.

This could affect pension funds which had a policy of not holding shares in blocking markets.

Hermes associate director of corporate governance and engagement Hans Hirt said: “Sometimes we are faced with the problem of only receiving a proper invitation to the general meeting – including information we need to exercise our voting rights in an informed manner – very close to the actual meeting date.”

The directive would also see an extension in the period between the convocation of the meeting and the record date – that is the date on which investors must show their holding in the company.

This is due to be extended to eight days, from six. Pension funds that lend their securities, such as Hermes, will therefore have more time to recall their loaned shares.

“By recalling your shares you can vote your full holding at a general meeting if there is a significant issue to be decided upon ,” Hirt said.

Often, pension funds leave the shareholder voting in the hands of their investment managers or private equity funds. The directive could see them making more decisions themselves