On 29 April 2021, business and individual investors organisations – namely Invest Europe, BETTER FINANCE, ecoDa, European Family Businesses, EuropeanIssuers, Federation of European Securities Exchanges (FESE), and SMEUnited – sent a joint letter to the European Commission to convey their shared concerns regarding the upcoming proposal on sustainable corporate governance.
The signing organisations:
- support the concept of sustainable corporate governance as a means to reconcile economic growth, social progress and environmental protection;
- acknowledge the aim of encouraging boards to consider their relevant stakeholders as having intrinsic value for decision-making in the best interest of the company over time;
- encourage the Commission to further pursue strengthening shareholders’ active participation in the governance of companies.
However the signatories:
- consider that the two topics of due diligence and corporate governance should be treated separately, and that the European Commission should avoid an oversimplified, one-size-fits-all approach;
- observe that taking into consideration many interests is a natural part of directors’ duties, and that principles related to this are already included in many corporate governance codes;
- consider that an EU initiative in this area that goes beyond the form of recommendations would be counterproductive;
- envisage that, if introduced, such a move would paralyse the functioning of the board and, in turn, hamper the ability of companies to act decisively to promote a sustainable transition.
Most shareholders have a long-term vision, whether it concerns the shareholdings of family businesses, public or private equity, or end-investors. One focus for enhancing sustainable corporate governance should therefore be to strengthen the long-term engagement of shareholders and investors (including individual shareholders).
As different companies cannot all be managed the same way, developments related to sustainable corporate governance would best come within the existing framework of codes. This way, companies are provided with useful guidance on governance, while allowing shareholders to decide on the best way forward.
As for listed companies, the signatories wish also to highlight that too many restrictions may increase reluctance to use public markets for financing. In this respect, further restrictions in this regard would risk conflicting with the objectives of the Capital Markets Union.
All signing organisations agree that the European Commission should take the time to develop a fully comprehensive analysis which can form the basis of an initiative that is appropriate for all EU27 jurisdictions.