Employees should have a say on their bosses’ bonuses and long-term investors should be rewarded with additional powers and benefits, a senior EU lawmaker has proposed.
The 28-country bloc is revising its rules on shareholder rights to put pressure on companies to focus on long-term sustainable growth and not short-term gains to please markets.
The proposed revision will also make it easier for companies to identify their shareholders, force asset managers to disclose their investment strategies and give shareholders a say on executive pay. But Sergio Gaetano Cofferati, a centre-left Italian who is responsible for finding agreement on the draft in the European Parliament, has proposed going further.
Employees should be entitled to express a view on planned bonuses for executivesd
Employees, and not just shareholders, should be entitled to express a view on planned bonuses for executives, Cofferati said in a number of proposed amendments to the draft law seen by Reuters.
Environmental, social and corporate governance factors and not just the share price should be considered when assessing the performance of directors, he added.
On Monday, the European Parliament’s legal affairs committee will discuss the report from Cofferati, who is a former leader of the most influential Italian trade union, the General Confederation of Labour (CGIL).
EU states should also put in place a ‘mechanism’ giving investors who agree to hold shares in a company for two years or more benefits such as additional voting rights, tax incentives, loyalty dividends or loyalty shares, Cofferati proposed in another departure from the original draft.
“Short-term shareholding is one of the main barriers for a proper shareholders’ engagement and for a stronger focus by shareholders on the long-term performance and sustainability of investee companies,” Cofferati says in his report.
The original draft said asset managers should disclose their investment strategies to large investors but Cofferati wants to go further and force fund managers to make public their strategies.
“Institutional investors and asset managers should publicly disclose, for each company in which they hold shares, whether and how they cast their votes in the general meetings ... and provide an explanation for their voting behaviour,” Cofferati has proposed.