Shareholders’ Rights in Agency Conflicts: Selected Issues in the Transatlantic Debate

The purpose of our paper ‘Shareholders’ Rights in Agency Conflicts: Selected Issues in the Transatlantic Debate’ (2018) 42 Delaware Journal of Corporate Law 569 is to provide the reader with a critical study of the existing regulations on shareholders’ rights, recently updated by the Shareholders’ Rights Directive II (Directive (EU) 2017/828), also in light of the US rules on the topic. The paper aims to tackle each selected, crucial issue—namely Proxy Advisors, Institutional Investors, Say on Pay and Related-Party Transactions—from a comparative perspective in order to highlight the possible convergence between Europe and the United States.

In particular, we focus on the strong efforts of the Shareholders’ Rights Directive II in (i) re-evaluating the role of institutional investors as key players in corporate governance dynamics; (ii) reforming the role of proxy advisors as a fundamental link between shareholders and markets; and (iii) modifying the directors’ remuneration issue in order to achieve a correct rebalancing of agency conflicts between shareholders and managers. This last issue—which became more important after the financial crisis—plays a central role in the scholars’ perspective and is one of the cornerstones of the Shareholders’ Rights Directive II. As pointed out by the Directive itself, and by the national comparative overlook, remuneration is in fact one of the fundamental instruments available to companies to bring together the interests of their managers with their own. In view of directors’ crucial role, it is also essential that the remuneration policy of companies is determined appropriately, and that shareholders are given the possibility to express their views on it (‘say on pay’).

On remuneration, the paper also offers an empirical analysis that focuses on Italian companies: the sample consists of 1053 observations, related to 211 listed companies, corresponding to all corporations listed on the Italian stock exchange’s main market (MTA) over the entire period under analysis (2012–2016), with the only exclusion of banks and insurance companies. The first part of our study aims to identify the impact of shareholders’ dissent on executives’ remuneration policies (with particular reference to the remuneration of the CEO and the Chairman), while the second one examines the (positive) reaction of the market to shareholders’ dissent and reduction in CEOs’ remuneration. Our results show that the market positively reacts to: (i) shareholders’ dissent about top CEOs’ high level of compensation; and (ii) its reduction later on.

Maria Lucia Passador is a Research Fellow at Bocconi University in Milan.

Federico Riganti is a Post-doc Fellow at University of Turin.