Shareholders of Dutch listed companies are increasingly voting against board proposals. In particular poorly substantiated proposals for exorbitant executive pay packages and proposals that would lead to a "carte blanche" for the board to issue new shares led to shareholder rebellion. This is one of the main findings in today’s released Eumedion analysis of the 2019 AGM season.
An external, 'peer' group of companies should no longer be leading for the level and structure of executive remuneration. Supervisory boards must attach equal importance to the pay ratios within the company, the identity, the purpose and the values of the company and the expectations of the relevant stakeholders, including shareholders, employees, customers and the wider society. Eumedion has embedded this principle in the today's updated principles for a responsible executive remuneration policy of Dutch listed companiess.
Eumedion believes that the proposal to adopt the reporting standards on climate risks in the non-binding guidelines on non-financial reporting is not effective and is a proponent of incorporating those standards in the EU Accounting directive. This follows from today's Eumedion’s response to the call for feedback on the recently published report of the technical expert group on sustainable finance (TEG) on climate-related disclosures.
Eumedion generally supports the proposals of the European Insurance and Occupational Pensions Authority (EIOPA) with respect to the integration of sustainability risks and factors in the investment policy of insurers. This follows from Eumedion’s response to the EIOPA consultation paper that was submitted today.
Eumedion has published an updated position statement on corporate tax policy and tax transparency. The position statement asks listed companies to have a clear and responsible tax policy as part of their strategy for good corporate citizenship.
On 7 December 2018, the Dutch Government published the long-awaited draft bill on the introduction of a legal response time of a maximum of 250 days that can be invoked by the management board of a Dutch listed company. The draft bill is a result of a number of high-profile cases of unsolicited attempts to acquire the shares of Dutch listed companies (e.g. AkzoNobel and Unilever) and aggressive shareholder activism in 2017. The bill was already announced in the coalition agreement of the new formed Dutch Government in October 2017
Institutional investors have urged Dutch companies to take more actions towards achieving a more gender balanced executive and supervisory board. They believe that progress made in appointing more female executive and supervisory directors in the past five years is disappointing and requires companies to accelerate their board refreshment process and to upgrade their talent management programme. To this end, Eumedion has sent a letter to all Ducht listed companies that have not yet reached the legal target of at least 30% female executive and supervisory directors.
Eumedion has requested all Dutch listed companies to better report on their view to create long-term value for all stakeholders, including the wider society, and their strategy to realise this. Better reporting on the long-term value creation model will be one of the Eumedion focus points for the 2019 reporting and proxy season, as reflected in the recently sent 2019 Eumedion Focus Letter.
Eumedion generally supports the proposals of the European Commission aiming for sustainable European capital markets. A series of draft regulations that were published in May lay the foundation for an EU framework which puts environmental, social and governance (ESG) considerations at the heart of the financial system. However, Eumedion has some reservations about a number of specific proposals, and doubts the usefulness and necessity of the proposal to amend the Benchmark Regulation. That is the key message of Eumedion’s response to the legislative proposals from the European Commission.
For decades the European Union (EU) has been a driving force behind the ambition of a single set of high quality globally accepted financial reporting standards (IFRS). By now IFRS is used in 144 jurisdictions for all or most of the listed entities; with the United States being the most notable exception. There are only a few examples where individual jurisdictions created deviations from individual IFRS. For investors, the existing and improving global comparability of IFRS reporting entities poses a tremendous benefit. Eumedion calls on the EU to continue to foster the goal of global comparability of IFRS in its response to a consultation on a possible revision of European reporting framework.
Shareholders of Dutch listed companies are turning up the heat on executive pay policies. Where in the past shareholders primarily assessed whether the new policy was aligned with the ‘pay for performance’ principle, they are now also looking critically at the impact of the new policy on the absolute levels of executive remuneration.
Pension funds, insurers and asset managers have developed the first Dutch Stewardship Code (hereafter: Stewardship Code). In doing so, they emphasise the increasing importance of engaged and responsible share-ownership and the role that institutional investors play in promoting long-term value creation at Dutch listed companies. In addition, the principles of the Stewardship Code offer pension funds, insurers and asset managers the opportunity to inform their beneficiaries and clients about how they have used their shareholder rights.
Eumedion supports MSCI's proposals to proportionate adjust the index weight of a company that deviate from the principle that the shareholders' voting power should be proportionate to their economic interest. Today, Eumedion submitted a comment letter to MSCI on the index provider’s consultation regarding the treatment of unequal voting structuresin the MSCI equity indexes. MSCI proposed in January to adjust the weights of so-called dual-class shares to reflect both their free float and their company level listed voting power.
Eumedion is positive about the European Commission's proposal to largely standardise and harmonise the voting procedures for the European shareholders' meetings (AGMs). According to Eumedion, the proposal will facilitate cross-border voting by shareholders and thus contribute to a higher participation rate of shareholders at the AGMs. Today, Eumedion submitted its comments on the draft European Commission Implementing Regulation as regards shareholder identification, the transmission of information and the facilitation of the exercise of shareholders rights.
The current governance of audit standards lacks broad stakeholder involvement and is dominated by accountants. The Monitoring Group, the group of international financial institutions and regulatory bodies and responsible for the overall governance of the international audit-related standard-setting process, issued a consultation document that outlines concrete proposals to make the audit standard-setting process future proof. In its today's issued comments, Eumedion welcomes the proposals that in many ways appear to mimic the governance of the IFRS Foundation. The composition of the independent board of the International Auditing and Assurance Standard Board (IAASB) should indeed be revised in a way that includes members from all major stakeholder groups.
Eumedion believes that considering sustainability factors when making investment decisions should be part of the fiduciary duty of institutional investors. That is the key message of the response submitted by Eumedion to the EU consultation on institutional investors and asset managers' duties regarding sustainability.
Institutional investors are calling on Dutch companies to take concrete action towards achieving the UN Sustainable Development Goals. Among the in 2015 adopted goals are an end to poverty and hunger; action on climate change and its impacts; gender equality, and access to clean water and sustainable energy. In today’s published Focus Letter for the 2018 reporting and AGM Season, Eumedion encourages all Dutch listed companies to assess on which 17 Sustainable Development Goals they can generate most impact and to align their business practices and KPI framework with these Goals. Eumedion also stresses the importance of clear and meaningful reporting on the companies’ SDG objectives, the progress made and the generated impact.
Pension funds, insurers and asset managers have prepared a draft Dutch Stewardship Code which expresses their position as an engaged and responsible shareholder at Dutch listed companies. Application of the code’s principles by institutional investors will contribute to sustainable long-term value creation of the investee companies and, consequently, to the long-term returns on the investment portfolio. The code also makes pension funds, insurers and asset managers more accountable to their beneficiaries and clients by making transparent how the exercise of the shareholder rights have contributed to the protection of the value of the investment portfolio. The draft code of conduct has been prepared by Eumedion participants and has been launched today by a public consultation.
Executives of Dutch listed companies pay much more attention to the long-term consequences of their strategy and policy than their US colleagues. This long-term orientation has also become somewhat stronger over the past ten years and is mainly driven by the long-term horizon of the shareholders of the Dutch listed companies and of the executive remuneration policy via the incorporation of long-term performance criteria. These are the main findings of research conducted by the Institute for Governance and Organizational Responsibility (iGOR) of the University of Groningen, commissioned by Eumedion.
The 2017 Dutch proxy season too place in the midst of various unsolicited bids, amongst them the take-over proposals for AkzoNobel, Unilever, Refresco, Accell Group and Telegraaf Media Groep. Nevertheless, only three proposals were rejected by the AGMs, amongst them one shareholder proposal. These are two of the main findings of the evaluation report of the 2017 Dutch proxy season, published today by Eumedion.
Eumedion is of the opinion that European supervisory convergence can be further promoted by a) regulations – instead of directives – without Member State options and b) pan-European supervision and enforcement. So says Eumedion in a today’s published comment letter on the European Commission's public consultation on the operations of the European supervisory authorities.
Eumedion is positive about the intention of the European Commission to address the divergences in corporate governance frameworks within the EU. Eumedion believes that the protection of minority shareholders and the possibilities that block chain technology offers should be part of this review. So says Eumedion in a today’s published comment on the European Commission's public consultation for the purpose of the Mid-term Review of the Capital Markets Union Action Plan which will be published in June 2017.
Eumedion generally supports and appreciates the proposed revisions by the International Corporate Governance Network (ICGN) to its Global Governance Principles. Today, Eumedion commented on the draft revisions to the Principles.
The Eumedion General Board has appointed Garmt Louw as new Chairman of the General Board of Eumedion. Garmt Louw (1952) is Chairman of the Boards of the Stichting Shell Pension Fund and the Shell Nederland Pensioen Stichting. Garmt Louw succeeds Peter Borgdorff who was Eumedion Board Chairman until 31 December 2016. Peter Borgdorff (Managing Director PFZW – Pension Fund for the healthcare and welfare sector) has completed his maximum statutory Board appointment term of six year and had to step down as a consequence.
Eumedion generally welcomes the proposed amendments to the German Corporate Governance Code. Especially the recommendation regarding a direct dialogue between the chairman of the supervisory board and investors is welcomed since it can contribute to the effectiveness of the internal supervision. This is one of the key messages in Eumedion's response to the public consultation on the proposed amendments to the German Corporate Governance Code.
"Although Eumedion is a small organisation, it has been able to make a significant and positive contribution to all three stages of the norm development process in the Netherlands during the past ten years. It is taken into account as a serious partner in discussions during policy developments by important decision makers, management and supervisory board of companies and other relevant parties, both domestically as well as internationally. Moreover, Eumedion is seen as a serious knowledge centre and an active and respected organization representing shareholder interests". This is one of the conclusions of today's published research report of the University of Groningen on the functioning of Eumedion in the Dutch Corporate Governance and Sustainability Landscape between 2006 and 2016.
Investors hardly have any formal influence on bodies that govern audit standards. In today's response to the Public Interest Oversight Board's consultation on its strategy 2017-2019, Eumedion states that there is a need for greater investor involvement in setting audit standards. The current dominant position of auditors in the standards setting process has to change in favour of investors and regulators.
All Dutch listed companies should analyse the potential risks and opportunities related to climate change for their business model and strategy, and should disclose what concrete efforts will be made to contribute to a carbon-neutral economy in the second half of this century. The impact of climate change and of the Paris Climate Agreement is one of the main themes Eumedion participants will focus on during their dialogues with Dutch listed companies in the run up to the reporting and proxy season 2017. The themes are incorporated in the so-called Eumedion Focus Letter 2017 that was sent to the Dutch listed companies this week.
Yesterday, the Eumedion General Board adopted the appointment of Amra Baliç as new member of the General Board of Eumedion. Ms. Baliç is Head of BlackRock's EMEA Investment Stewardship team based in London.
A mandatory split between the roles of CEO and Chairman, a mandatory annual shareholders' vote on the remuneration report and boards that should be willing to enter into constructive dialogue with the main company shareholders. On these points, the G20/OECD Corporate Governance Principles need to be strengthened. So says Eumedion in its today's sent contribution to the Financial Stability Board's peer review on the implementation of the G20/OECD Principles of Corporate Governance.
Executive remuneration policy, the authority to issue new shares, anti-takeover devices, risk management and audit reports, taxation and climate risks were the main discussion items before and during the 2016 shareholder meetings (AGMs) of Dutch listed companies. This is one of the conclusions of the evaluation report of the 2016 proxy season, published today by Eumedion.
The interests of minitory shareholders at companies with a controlling shareholder should be better protected. A number of proposals for reaching this are included in position paper, published today by Eumedion. The proposals are the result of an extensive consulation with stakeholders on this subject.
An unnecessary liquidation of a company will not benefit the stakeholders involved. In particular shareholders are not benefitted by that since they are the last in line for the remaining assets. Eumedion believes that a European insolvency framework should ensure that viable businesses can be restructured and can continue operating. Therefore Eumedion welcomes European legislation in the area of pre-packs and of binding restructuring agreements.So says Eumedion in a today’s published comment on the European Commission's public consultation on this subject.
The European non-binding guidelines for reporting on non-financial information by companies should be principles-based and should avoid duplication of the reporting frameworks that are already in place. This is one of the key messages in Eumedion's reply to the European Commission's public consultation on possible European non-financial reporting guidelines.
A number of proposals from the Dutch Corporate Governance Code Monitoring Committee undermines the principle of independent supervision by the Supervisory Board and should therefore be deleted. This is one of the core elements of Eumedion's comments on the Commitee's proposals for revision of the Dutch Corporate Governance Code.
A growing number of institutional investors consider sustainability factors when making investment decisions, and an increasing number of them integrate sustainability risks in the standard investment analysis. But there is room for improvement, especially on the disclosure of non-financial information by listed companies. The credibility of this information is not yet comparable to the credibility of financial information. That is the message from Eumedion in its response to the consultation on long-term and sustainable investing, issued by the European Commission.
In light of the ongoing informal trilogue, Eumedion pusblished an update of its position on the proposed Shareholder Engagement Directive today. In its position statement, Eumedion supports the EP proposal for mandatory country-by-country-reporting by all large companies. Such transparency will allow a more detailed analysis by investors. It will also offer shareholders the opportunity to have a dialogue with the board of the company on this topic.
The accounting standards that comprise IFRS can generally be regarded as leading and of unmatched quality. However, Eumedion still sees room for many significant improvements to the Standards. The International Accounting Standards Board (IASB) already highlights quite a number of those potential improvements in the agenda consultation 2015. Eumedion’s response, that was published today, specifies several other financial reporting challenges for investors that the IASB is welcome to address.
Eumedion expects companies to have a clear and responsible tax policy and to be transparent on this in their annual report. In addition, Eumedion sees it as a responsibility of the Board to find an appropriate balance between the benefits of reducing tax expenses and the possible related risks, including the 'social license to operate’. So says Eumedion in a today’s published position statement on corporate tax avoidance and tax transparency.
Eumedion calls on the European Commission and the European Parliament to endorse IFRS 9 without delay. IFRS 9 allows investors to better judge the strenght of individual banks and insurance companies. Eumedion explained its views today in a letter to the members of the Committee on Economic and Monetary Affairs of the European Parliament and to European Commissioner Jonathan Hill.
The company's acquistion and tax strategy and integrated reporting are the main themes Eumedion participants will focus on during their dialogues with Dutch listed companies in the run up to the reporting and proxy season 2016. The themes are incorporated in the so-called Eumedion Focus Letter 2016 that was sent to the Dutch listed companies this week.
The checks and balances in a company that has a controlling shareholder who is also represented in the supervisory board of that company must be strengthened. So says Eumedion in a today's published draft position paper on the position of minority shareholders in companies with a dominant shareholder.
The scope of the Best Practice Principles for Providers of Shareholder Voting Research and Analysis (BBP) should be narrowed down to proxy voting advisory services only. The scope of the BBP should be aligned with the scope of the upcoming transparency obligations for proxy advisors under the new Shareholder Rights Directive (SRD), so says Eumedion in its response to the call for evidence of ESMA on the impact of the 2014 introduced BBP.
The positive effects of the ongoing dialogue between listed companies and their shareholders are increasingly visible in the voting outcomes of the shareholder meetings (AGMs). This year, the number of proposals that received more than 20% against votes fell to 18, compared to 36 in 2014 and 46 in 2013. These figures are from today's published Eumedion evaluation report of the 2015 Dutch proxy season.
The proposed review of the European Prospectus Directive should not go at the expense of an adequate level of investor protection. This is the key message in today's published Eumedion reaction on the European Commission's consultation document on the review of the Prospectus Directive.
Since last year, a specific ESG theme is connected to the Eumedion Thesis Prize. In 2015, Eumedion would like to receive theses that focus on the theme ‘The impact of shareholders on companies’.
Eumedion rejects proposals to introduce differential voting or ownership rights for shareholders who hold their shares at least two years. It could lead to a concentration of control within a certain group of shareholders and discourage the engagement of other shareholders, so says Eumedion in its comments on the draft report of the European Parliament's rapporteur on the the proposal for a shareholder engagement directive.
Eumedion is pleased that the Organisation for Economic Co-operation and Development (OECD) has revised its Principles of Corporate Governance, but also believes that the revisions should show a bit more ambition. Today, Eumedion commented on the draft revisions to the OECD Corporate Governance Principles.
Nouredyn el Sawy (University of Groningen) has won the Eumedion Thesis prize of 2014, worth 2,500 euros for his thesis on the effects of diversity in the composition of top management teams in the pharmaceutical sector. His thesis has the title: “Learning geology before the earthquake: The influence of faultlines in boards of directors on post-M&A firm value and performance.”
The introduction in Europe of the financial reporting framework ‘IFRS’ has been very beneficial for investors. IFRS is the leading framework for financial reporting in the world, not only by the quality of the issued standards but also by the transparency in the standard setting process and the focus on providing relevant information for investors. This is Eumedion's key message in its reaction sent today on the European Commission's consultation on the effects of using IFRS in the European Union.
Integrated reporting and a more informative and effective 'in control statement' and internal audit function are the main themes Eumedion participants will focus on during their dialogues with Dutch listed companies in the run up to the reporting and proxy season 2015. The themes are incorporated in the so-called Eumedion Focus Letter 2015 that was sent to the Dutch listed companies today.
The European Commission plays a key role in supporting and promoting corporate social responsibility (CSR). In addition to formulating a CSR policy, the Commission has recently developed regulations that promote transparency about the impact of the company's activities on the environment and society. It is of great importance that a level playing field is guaranteed. This is the essence of Eumedion’s response to a consultation on the current and future CSR policy of the European Commission.
Shareholder participation in the decision-making process at AGMs of Dutch listed companies was record high this year. While the average AGM attendance at blue chip ('AEX') companies was approximately 63% in 2013, the average attendance at the AGMs increased to almost 70% this year. The average turn-out at the AGMs more than doubled between 2004 and 2014. Shareholders are showing their involvement with the company’s affairs. This is one of the findings of Eumedion's evaluation report of the 2014 voting season.
The public equity market is gradually losing its function as a growth engine for Dutch companies Over the past eleven years, the number of Dutch companies, listed on the Amsterdam stock exchange, has fallen from 160 to just under 100. Targeted measures are necessary for attracting new listed companies, according to a recently published position paper by Eumedion.
Until 2013, the Eumedion Thesis Prize was awarded annually to the best doctoral thesis on environmental, social and/or corporate governance aspects of investing (ESG) and/or corporate social responsibility (CSR). This year, Eumedion has chosen for a specific theme within the ESG area. For the 2014 Thesis Prize, Eumedion would like to receive theses that examine the impact of engaged share-ownership.
Eumedion generally supports the European Commission's proposal for a Directive on shareholder engagement. In its today´s published position, Eumedion states that the proposal will encourage long term engagement of shareholders with listed companies. Shareholders are granted important additional rights that enable them to further improve their performance as responsible and engaged shareowners, while listed companies benefit from more involved and better known shareholders.
There is a lively debate on the role of ‘prudence’ in financial reporting. Unfortunately, this debate is often hampered by the absence of an agreed definition of prudence. In a letter to the International Accounting Standards Board (IASB), sent today, Eumedion wishes to contribute to the debate by distinguishing between three definitions of prudence. For each of these definitions, Eumedion indicates which interpretation of the IASB would best serve the interest of investors.
Eumedion welcomes the proposals to reform the Shareholder Rights Directive, which the European Commission launched earlier today. The proposals further encourage long term engagement of shareholders with listed companies. Shareholders are granted important additional rights that enable them to further improve their performance as responsible and engaged shareowners, while listed companies benefit from more involved and better known shareholders.
International Financial Reporting Standards (IFRS) should not contain accounting choices as accounting choices negatively affect comparability of financial statements. In its reaction to the Discussion Paper 'A review of the Conceptual Framework for Financial Reporting, Eumedion writes the International Accounting Standards Board (IASB) that accounting choices result in uncertainty for investors and potentially allow for 'window dressing'.
Pension trustees should be encouraged to take account of environmental, social and governance (ESG) factors in making investment decisions. One method to achieve this is requiring pension trustees to consider in their investment policies not only financial but also ESG aspects of investee companies' performance and report annually on how they have taken these factors into account. This is one of the key messages of Eumedion's response to the UK Law Commission consultation on fiduciary duties of investment intermediaries.
Eumedion believes that the draft 'Best Practice Principles for Governance Research Providers' has a too wide scope and is too vague in its contents. In a today's sent comment letter, Eumedion recommends the Drafting Committee that the Principles should adopt a more targeted approach, which addresses proxy advisory-like risks which are genuinely significant to the voting process. Moreover, Eumedion advises to make changes to the draft Principles' structure to ensure a 'real' code structure.
Eumedion is very much supportive of the International Auditing and Assurance Standards Board (IAASB) efforts to respond to the demand from users of financial statements, including investors, to make the statutory auditor's report more informative and company-specific. Especially the proposal to insert a new section entitled 'Key Audit Matters' in the auditor's report of a listed company is, according to Eumedion, a step forward in increasing the relevancy and usefulness of the auditor's report for users. This is one of the key messages of Eumedion's comments to the IAASB Exposure Draft 'Reporting on Audited Financial Statements'. The comments were submitted today.
Eumedion supports the European Securities and Markets Autority (ESMA) in its efforts to further develop a more harmonised supervisory approach regarding the financial information published by European listed companies. The draft ESMA Guidelines on enforcement of financial information will help to improve the quality and consistency of financial repoerting across Europe, whicht is fundamental for institutional investors' confidence in listed companies' performances and prospects, says Eumedion in its today's sent reaction on the ESMA consultation document.
More meaningful reporting by audit committees and by statutory auditors are the main themes Eumedion participants will focus on during their dialogues with Dutch listed companies in 2014. The themes are incorporated in the so-called Eumedion Focus Letter 2014 that was sent to the Dutch listed companies earlier this week.
The International Accounting Standards Board (IASB) and the US standard setter FASB have created a well designed draft standard for lease obligations. The proper accounting for leases in operating income and debt is very important for investors: it significantly reduces the risks for investors in companies that have lease contracts. Eumedion explains in detail the virtues of the proposals in its today's reaction on the IASB's and FASB's Exposure Draft on lease accounting.
The Eumedion Thesis Prize is awarded annually to the best doctoral thesis on environmental, social and/or corporate governance aspects of investing (ESG) and/or corporate social responsibility (CSR). The Thesis Prize aims to support and encourage excellence in sustainability and governance research and writing at a graduate level.
The average attendance at the AGMs of the Dutch blue chips decreased for the first time in many years. The attendance rate declined from 63.7% in 2012 to 62.7% in 2013. This was due to the rather low AGM attendance rates of KPN, Imtech and PostNL. This is one of the conclusions in the today's published Eumedion evaluation report of the 2013 Dutch proxy season.
Eumedion supports the draft integrated reporting framework, developed by the International Integrated Reporting Council (IIRC). Listed companies should be urged to prepare their annual report or management discussion and analysis in accordance with the IIRC integrated reporting framework. The integrated reporting framework should refrain from demanding the preparation of another separate document; companies should avoid publishing multiple reports that contain more or less the same information. So says Eumedion in its today's released reaction to the consultation draft of the International Integrated Reporting Framework.
More sustainable business models are needed to make banks more appealing for long term investors and to restore long term economic growth as a whole. In a today's published paper on the investability of Dutch banks, Eumedion has identified seven arrangements that could be put in place to strengthen banks' long term achievements. Amongst them are enhancing transparency by using the Enhanced Disclosure Framework, developed by the Financial Stability Board, disintermediation and sustainable dividend policies.
Eumedion has strong reservations about possible European legislation on granting long term investors with extra dividend and/or voting rights. Eumedion believes that loyalty rewards seem unlikely to improve shareholder involvement with investee companies. "Inactive shareholders would also pocket the extra dividend or voting rights once a certain period has lapsed", writes Eumedion in its comment letter to the European Commission's Green Paper on the long term financing of the European economy.
Eumedion, Eurosif, CDP, CDSB, EFFAS, UNEP-FI, ICGN and IIGCC strongly support the European Commission proposal published on April 16th mandating large European companies to report material non-financial information and their diversity policy in their annual reports. While some aspects of the proposed legislation can be strengthened, the legislation must not be weakened by the co-legislators.
Eumedion welcomes the proposals of the International Auditing and Assurance Board (IAASB) to improve the audit quality. This is the core of Eumedion's comments on a consultation by the global audit standards setter.
The required disclosure of net short positions above 0.5% is valuable for institutional investors. This is stated in Eumedion's response to ESMA’s Call for Evidence on the functioning of the European Short Selling Regulation.
Eumedion is positive about the Corporate Governance Action Plan, published by the European Commission in December 2012. It supports almost all the measures announced. This is the key message of a Eumedion letter sent today to the European Commission.
One of the focal points (also known as its spearheads) of Eumedion is to reduce the amount of non-material disclosures in the financial reporting. Eumedion and the Confederation of Netherlands Industry and Employers VNO-NCW asked the Netherlands Authority for the Financial Markets (AFM) for its position in this matter.
The joint Eumedion - VNO-NCW letter can be found here.
The AFM response letter can be found here.
Today, Eumedion published an update of its Corporate Governance Manual. The manual provides the institutional investors which are members of Eumedion with guidelines for taking part in and voting at the general meetings of the Dutch listed companies. The manual also offers an overview of the rights and responsibilities of shareholders of Dutch listed companies. The updated manual is applicable from January 1st, 2013 onwards and replaces the 2010 version.
Eumedion concurs with the International Accounting Standards Board (IASB) that the reporting on leasing should be improved. Therefore, Eumedion would welcome an appropriate accounting standard on this subject. This is the core of a Eumedion letter sent today to the IASB.
Dutch institutional investors hold the majority of their shares in Dutch listed companies for a long period. More than 80% of the portfolio is held for 5 years or more and at least 55% of the investments are allocated to holdings of at least 10 years. These are the main results of a study, conducted by Tilburg University, on the duration of Dutch equity ownership by large Dutch pension funds and asset managers. The Dutch institutional investors investigated are the nation's largest pension funds ABP, Pensioenfonds Zorg en Welzijn, the pension fund for the care and welcare sector, PME, the industry-wide pension fund for metalektro, and Spoorwegpensioenfonds, the pension fund for the railway transport sector, as well as the Dutch asset managers Robeco (Hollands Bezit fund) and Teslin Capital Management. The study was commissioned by Eumedion and covered, roughly, the period 2003 to the first half-year of 2012.
Eumedion generally supports the initiative to develop a 'good practice guide' for engagement meetings between listed companies and investors in the UK market. Such a good practice guide can contribute to increasing the quality of the dialogue between listed companies and shareholders. This is the core of Eumedion's comments on the consultation document ‘Improving Engagement Practices by Companies and Institutional Investors’ of the UK Institute of Chartered Secretaries and Administrators (ICSA).
Eumedion criticises the working of accounting standard IFRS 8' Operating Segments'. This is the core of Eumedion's response to the International Accounting Standard Board (IASB) Post-implementation Review IFRS 8.
The strategic interests of both institutional investors and listed companies would benefit from a changing focus to “know more of less companies” instead of “know less of more companies,” speakers heard at the November 8th symposium in Utrecht of Eumedion, the Dutch corporate governance and sustainability forum, which includes most of the country’s biggest pension fund investors. The statement was strongly endorsed by the speakers, panelists and attendees. The theme of this year’s symposium was: “Long-term business strategy and long-term investors: it takes two to tango”.
More meaningful reporting by the supervisory directors and avoidance of boilerplate language in the Annual Report and Accounts are the main themes Eumedion participants will focus on during their dialogues with Dutch listed companies in 2013. The themes are incorporated in the so-called Eumedion Spearheads Letter 2013 that was sent to the 75 largest Dutch listed companies this week.
Eumedion is very much supportive of the International Auditing and Assurance Standards Board (IAASB) efforts to respond to the demand from users of financial statements, including investors, to make the statutory auditor's report more informative. Especially the proposal to insert an 'Auditor Commentary' in the auditor's report is, according to Eumedion, a step forward in increasing the relevancy and usefulness of the auditor's report for users. This is one of the key messages of Eumedion's comments to the Invitation to Comment (ITC) on IAASB’s indicative direction for the future auditor’s report. The comments were submitted today.
A majority of listed companies in Europe appears larger than they are to investors. The consolidated financial statements include subsidiaries in full, even if these subsidiaries are only partly owned. Accounting standards require companies to do so.
Only two line items in the financial statements reflect the actual ownership of subsidiaries: ‘net income to common shareholders’ and ‘common equity’. This is insufficient for investors to properly assess the value and risks of companies. The position paper ‘Full consolidation of partly owned subsidiaries requires additional disclosure’ issued today by Eumedion highlights this issue in detail.
Dutch institutional investors increasingly use environmental, social and governance information in their investment process. This so called ESG performance is also input for voting at shareholders meetings. But as the current quality of sustainability and governance information does not meet the information demands of institutional investors, research companies and analysts still send long questionnaires to listed companies. That is one of the conclusions form Eumedion's report "KPIs and Sustainability Performance". The Rotterdam Erasmus School of Economics and Shareholder Support did the research.
Eumedion is not convinced that there is sufficient supportive evidence for regulatory interference in the small and vulnerable proxy advisory market. Clearly, introducing prescriptive regulatory measures on the voting advisors would be too severe. If it is decided to take EU policy action, Eumedion has a strong preference for non-binding guidelines (code of conduct) or recommendations to promote the quality and integrity of proxy advisory firms. This is the key message of Eumedion's comments on ESMA's Discussion Paper ' An Overview of the Proxy Advisory Industry; Consideration on Possible Policy Options'. The comments were submitted today.
The concept of engaged share-ownership became more important in the 2012 proxy season. This is reflected in the increase in the number of votes casted at the Dutch AGMs and the fact that shareholders are taking an increasingly critical look at the proposals for amendments to the executive board's remuneration policy and at the proposals for the (re)appointment of supervisory directors. These are the key elements of the 2012 Eumedion evaluation report of the Dutch AGM season, which was published today.
Eumedion is not in favour of a European legislative initiative to improve the gender balance in the boards of European listed companies. However, in the selection and appointment process for new board members, the executive search company should support a range of candidates who add to the broader diversity of the board without compromising board quality, effectiveness and cohesion. This is Eumedion's central message in its reaction to he European Commission's consultation on gender imbalance in corporate boards in the EU.
A harmonised EU private law redress system is needed to protect shareholders of EU listed companies against a breach of any EU company law regulation. This is one of Eumedion's suggestions for future EU priorities in the field of corporate governance and company law in its reaction on the EC consultation on the future of European Company Law.
Today, Eumedion suggested two proposals to amend the European Commission's proposal to modernise the Transparency Directive. The objective of the proposals is to make the new rules more useful and less burdensome for long term institutional investors.
Eumedion is concerned that some of the proposals for a regulation and a directive on markets in financial instruments ('MIFID II and MiFIR') will seriously harm long term institutional investors' interest and their returns to European citizens as being pensioners, policy holders and savers. Eumedion writes this in a today's sent letter to the European Parliament. Eumedion hopes that the suggestions for amendments will be taken into account in the negotiating process between the European Commission, the European Council and the European Parliament.
The Eumedion Thesis Prize is awarded annually to the best doctoral thesis on environmental, social and/or corporate governance aspects of investing (ESG) and/or corporate social responsibility (CSR). The Thesis Prize aims to support and encourage excellence in sustainability and governance research and writing at a graduate level.
Eumedion highly appreciates the European Securities and Markets Authority (ESMA) for publicly raising its concerns on the lack of a consistent view on materiality by preparers, auditors, users and in some cases accounting enforcers, as Eumedion wonders which body would have otherwise raised these concerns. Eumedion sees the inconsistent views as a potential threat to the quality of the financial statements of listed companies and harmful for investor interests and confidence. However, Eumedion questions whether a securities regulator should issue guidance regarding the concept of materiality. Eumedion thinks that the an international organisation like the International Federation of Accountants (IFAC) would be better equipped. This the core of Eumedion's response to ESMA's consultation paper 'Considerations of materiality in financial reporting'.
Eumedion is in strong favour of adding an additional prudentional assessment criterion for bank takeovers to address concerns about the consequences of a bank takeover for the financial stability. This is one of the elements of Eumedion's reaction to the European Commission's consultation paper on acquisitions and holdings in the European financial sector.
Eumedion supports the Basel Committee's initiative to revise the supervisory guidance for assessing the effectiveness of the internal audit function in banks. This is the core of Eumedion's reaction on the Basel Committee's consultative paper 'The internal audit function in banks'.
Eumedion is in favour of retaining the current requirement of the Prospectus Regulation to produce an auditor report for profit forecasts and profit estimates. Eumedion therefore supports the draft technical advice of the European Securities and Markets Authority (ESMA) to the European Commission on this issue. Eumedion expressed its view in a letter that was sent to ESMA today.
Financial innovation has led to the creation of new types of financial instruments that give investors economic exposure to publicly listed companies, commonly referred to as cash settled instruments. Those instruments can be used to acquire secret stocks in companies, which could give a false picture of economic ownership of publicly listed companies. In order to ensure that issuers and investors have full knowledge of the structure of corporate ownership, the notification requirement for substantial shareholdings in Dutch listed companies has been extended to cash settled financial instruments from 1 January 2012 onwards. Below you will find the details of the mandatory introduction of the notification requirement for cash settled instruments and of a policy rule regarding the calculation methodology of cash settled instruments.
The proposed framework for integrated reporting by the International Integrated Reporting Council (IIRC) is a good start for the development an international reporting standard that really integrates a company’s financial and non-financial performance. Eumedion welcomes the IIRC’s proposals concerning forward looking statements and tangible environmental, social and governance targets.
Eumedion would have liked some suggestions on the auditor’s role in the assurance of an integrated report and some guidance on the status of the annual accounts in relation to an integrated report.
Eumedion, the corporate governance forum representing 69 institutional investors, submiitted its response to the IIRC discussion paper 'Towards Integrated Reporting - Communicating Value in the 21st Century' today.
Most of the proposed amendments to the Transparency Directive can rely on Eumedion's support, according to a today's published Eumedion position paper. This relates in particular to the European Commission's proposal to extend the scope of the Transparency Directive to certain cash settled financial instruments, and to the proposal for maximum harmonisation of the regime for the notification of a major holding.
The most important projects that previsously were added to the IASB agenda (contract revenues, leases, financial instruments) as well the revision of IFRS 8, are among the most pressing financial reporting needs, according to Eumedion's comment letter to the IASB Agenda Consultation 2011.
Eumedion is not in favour of the proposed Directive implementing a Financial Transaction Tax (FTT). If enacted, most transactions in financial instruments involving a financial institution are likely to become subject to the FTT from 2014 if at least one party is established in the European Union. In a position paper, Eumedion explains why she rejects the proposed Directive.
Eumedion informs the British Department of Business, Innovation and Skills (BIS) about its experiences with the binding vote on (amendments to) the remuneration policy of the management board of Dutch listed companies and with the works council's right to present its opinion on the proposed remuneration policy as part of the BIS consultation on its discussion paper on executive remuneration.
In its response to ESMA's call for evidence on empty voting, Eumedion shares its experiences with empty voting in the Dutch market. In the letter, Eumedion differentiates between i) vote borrowing, ii) certificates of shares, iii) anti-takeover foundations, iv) financing preference shares and v) employee stock ownership plans. Eumedion also presents some measures to mitigate the negative effects of empty voting.
Eumedion annually sends what is known as its ‘spearheads letter’ to the 75 largest Dutch listed companies. The spearheads letter comprises subjects that Eumedion participants would like to bring to the attention of the boards of the Dutch listed companies, which they may then put forward in the discussions outside and/or at the shareholder meeting. The spearheads for 2012 relate to risk (management) disclosures and the explanatory notes to the nomination for (re)appointment of the external auditor.
Today, Eumedion’s General Board has appointed Mr. Frederik van Beuningen (Teslin Capital Management) as Vice Chairman of Eumedion. He succeeds Ronald Florisson, who left Eumedion at the beginning of September, because he resigned from Robeco to start his own company.
In this year’s shareholder season, much time was again spent on discussion about remuneration and bonuses. Many Dutch shareholders showed their concerns in their dialogues with listed companies. In the United Kingdom, a comparable concern is growing, as the Financial Times describes in its article of October 2, 2011. 'Escalating executive pay levels and the mismatch between remuneration and company performance are causing increasing concern among shareholders, regulators, the general public and even politicians.' Eumedion's executive director was also quoted in this article.
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