The Financial Crisis: A Reason to Improve Shareholder Protection in the EU?

Shareholder empowerment, steps forward and steps back

“…Accordingly, any changes in favour of empowering shareholders further ought to be exclusively targeted towards long-term shareholders only (Leo, 2005). In fact, this view is supported by Mukwiri and Siems (2014) who argued in favour of such a move, when they stated that the powers of long-term shareholders ought to be strengthened.…”

“…In fact, the financial crisis originated in 2007-2008 has been characterised as the result of "untrammelled managerial power", the lack of risky behaviour regulation and undertaking of unsound corporate activities by boards of directors (John, 2008) and the populist political response to articulate arguments in favour of greater powers for shareholders . This crisis has stimulated a debate on corporate governance and the primacy of shareholders empowerment value (Mukwiri and Siems, 2014). Indeed, the debate raised issues such as the question whether shareholders ought to be further empowered to have a greater influence over the companies' activities.…”

“…In addition, ideally, shareholder empowerment might ensure better monitoring of management and therefore better-run company corporate activities (Mukwiri and Siems, 2014). Yet, it is not self-evident that shareholder empowerment has such a difference in corporate outcomes and such a positive effect.…”

Protectionism and the EU Market for Corporate Control: Is It Possible to Get the Best of Both Worlds?

“…Mukwiri and Siems observe that boards of financial firms striving to keep solvent and therefore in need of liquidity, pushed by stock market price index performance measures, are likely to have little choice but to focus on short-term demands of short-term liquidity providers. 91 As rejected by the UK Reviews, taking a protectionist standard is unlikely to resolve the problem of short-termism, as it would most likely weaken UK's position as a regional financial centre. With no clear legal answers to short-termism, given that the UK market is more liberal than the EU market, it is likely that UK will continue to suffer with the short-termism problem more than the rest of the EU.…”

“…Investors who largely contribute to corporate liquidity tend to be short-term investors; and boards of firms striving to keep solvent and therefore in need of liquidity, pushed by stock market price index performance measures, are likely to have little choice but to focus on short-term demands of short-term liquidity institutional investors. 115 The policy choices that the UK and Germany have long made on what interests are protected in regulating their markets have respectively resulted in liberal/short-termism and protectionist/long-termism. During takeovers, UK disarms managers to promote shareholder interests, while Germany empowers managers to promote corporate interests.…”