4th CECL Conference

Held in Leiden, 16 September 2011

The 4th biennial conference of the Centre for European Company Law (CECL) was devoted to the topical theme of Responsible Shareholdership. Distinguished academics tried to find different incentives to steer investors into a more long-term, company oriented attitude, in particular as regards the behavior of proxy advisers and institutional investors.
The conference highlighted many complicated aspects of an essential feature of our economic system, i.e. shareholder autonomy, and the possible role of the law to commit investors to objectives beyond their short-term profit quests.

Liquidity test for paying out dividends

Koen Geens ( Leuven, Belgium) kicked off the conference by inter alia advocating a liquidity test, in addition to a balance sheet test, for paying out dividends in a listed company.

Code of conduct for proxy advisors

Holger Fleisher (Max Planck Institute, Hamburg, Germany) pleaded for more transparency and accountability of proxy advisors, e.g. by binding them to a code of conduct and obliging them to disclose their conflicts of interests and voting policies on a regular basis, just like credit rating agencies and auditors.

UK stewardship code

Iris Chiu (UCL, London, UK) analyzed the effect of the UK Stewardship Code on institutional investors. She noted that the Code was not clear at all on the meaning of the wider public good that institutional investors officially have to take into account and mentioned that the Code was ‘peppered with rhetoric’.

A judge’s perspective: matching influence and responsibility

Matthijs de Jongh (Supreme Court, The Hague, the Netherlands) took a more ex post, judge-oriented approach and tried to strike a balance between the principles of shareholder autonomy and fairness when defining the standard for shareholder behavior. He stressed that a growing factual influence of shareholders in the company should go hand in hand with a growing responsibility toward all other constituencies.

Social cooperative

Jaap Winter (Duisenberg School of Finance, Amsterdam, the Netherlands) once more stated his view that one of the fundamental problems lies in the widespread application of Modern Portfolio Theory (extreme diversification and index tracking) by fund managers. Winter announced that he is currently involved in a legal experiment, in an attempt to distract companies from the short-term discipline of financial markets, by creating a social cooperative that can be listed.

Expropriation of shareholders: the Dutch Intervention Act

The speech of Steef Bartman was about expropriation of shareholders in a distressed financial institution in the Netherlands, as foreseen in a new draft legislation (the so-called Intervention Act), analyzed and criticized against the backdrop of the requirements set by and flowing from the European Convention on Human Rights.

Loyalty shares

Finally Pavlos Masouros (PhD, Leiden, the Netherlands) took the audience to the economic sphere of statistics on capital accumulation over time in the western economies and its relation to equity short-termism. He advocated the introduction of loyalty shares in various forms.