Shareholder Preferences and Shareholder Democracy
The role of shareholders in corporate governance has evolved in recent decades, even in jurisdictions where shareholder influence has been limited. Traditionally, shareholder interests were held to be narrowly focused on maximising financial returns, with governance practices structured around this objective. However, growing awareness of environmental, social, and governance (ESG) issues has shifted the conversation. […]
Apostolos Thomadakis is Head of Research at the European Capital Markets Institute (ECMI) and Research Fellow at the Financial Markets and Institutions Unit at the Centre for European Policy Studies (CEPS) in Brussels.
The role of shareholders in corporate governance has evolved in recent decades, even in jurisdictions where shareholder influence has been limited. Traditionally, shareholder interests were held to be narrowly focused on maximising financial returns, with governance practices structured around this objective. However, growing awareness of environmental, social, and governance (ESG) issues has shifted the conversation. Shareholders today are increasingly vocal about matters beyond maximising financial performance, such as climate change, social justice, and corporate responsibility.
This evolution raises critical questions about shareholders’ power over the company and to what extend that power takes the form of democracy. To enhance corporate governance and align with shareholder preferences, the EU should strengthen the Shareholder Rights Directive II by making ESG resolutions binding, standardise ESG reporting for consistency, promote engaged shareholding, recognise the increasing importance of proxy advisors, empower the general meeting to approve sustainability reports and expand stewardship codes across Member States for active institutional investors.
