International Law

Report on shareholder engagement and participation

The Parliamentary Joint Committee on Corporations and Financial Services has released its report on shareholder engagement and participation.

The Committee made specific recommendations in two categories:

• the efficacy and integrity of different voting mechanisms; that is, the vote lodgement and recording process; and
• the capacity for shareholders to exercise their voting entitlements effectively.

The Committee also concluded that:

• the basis for any deficiencies in the participation and engagement of shareholders on corporate governance matters is frequently company or shareholder inertia or apathy, or companies' cultural resistance to acknowledging the views of investors. In other words, investors and companies are not always choosing best practice currently permitted by the current regulatory framework, rather than being hampered by it, or being permitted to abuse an overly relaxed system to the detriment of shareholders. Consequently, the majority of contributors suggested that additional regulation may not be effective or warranted in facilitating engagement.
• while short selling is a legitimate trading tool, it is necessary to ensure it is appropriately disclosed to the market to ensure that undesirable practices that potentially accompany short sales can be identified by regulators. Further, the committee does not oppose institutional investors lending their stocks to maximise returns, but considers that funds should be required to disclose their stock lending practices or policies to members.

Full post as published by Australian Regulatory Compliance Review on June 23, 2008 (boomark / email).