Eumedion pushes boundaries with trailblazing code ahead of updated EU shareholder rights directive

New code is published by Dutch investor body

Eumedion, the Dutch corporate governance and sustainability forum, has published an 11-principle Stewardship Code which goes further and is stricter than the Shareholder Rights Directive II [SRDII], the forum said.

Notably, the Dutch Code takes a tougher stance than its UK counterpart, currently under revision by the Financial Reporting Council, on securities lending. RI reported the publication of the first draft of the code last September.

It explicitly mandates asset owners and managers to recall lent shares if significant votes are coming up in the ballot of an AGM. It also mandates them to abstain if their short positions are larger than their long positions.

The rationale behind this approach is that short positions “are probably not aligned with the objective” of long-value creation which is a paramount principle presiding over the Code.

This contrasts with the UK Code, which recommends disclosure of just the approach taken on stock lending and recalling lent stock, as part of the guidance clarifying Principle 6 (policy on voting and disclosure of voting activity).

The Dutch Code also refers to “social and environmental impact” and “corporate governance” among the “material issues” that asset owners and managers should monitor in investee companies.

When it comes to engagement, the Code not only says that investors should be prepared to have dialogue with boards but also be “prepared to escalate their stewardship activities in case issues remain unresolved”.

In the guidance that explains this principle, it includes among those “escalation actions” not only engagement meetings and voting shares at AGMs but also divestment.

As far as the disclosure of voting records is concerned, although signatories of the UK Code should already do it, the Dutch Code goes further by establishing a minimum periodicity of once every quarter, as well as requiring an explanation of the most significant votes.Conceptually, the guidance also clarifies that, as opposed to the EU’s SRDII, the Dutch Code prefers to demand from investors a “stewardship policy” rather than an “engagement policy” because it considers engagement as just one element of the broader notion of stewardship.

The Code enters into force on 1 January 2019, before the deadline to transpose the EU’s SRDII (June 2019, and September 2020 when it comes to the requirements around shareholder identification, transmission of information and voting).

Compliance with the Dutch Code is monitored by the General Board of Eumedion and other designated members.

A summary of the compliance monitoring report should be made public, according to Eumedion.

The Dutch Code builds on a draft published in September 2017. The Code has been prepared by a working group formed by the following participants:

Garmt Louw (Chairman), Shell Pension Fund
Peter Bos, Teslin Capital Management
Erik Breen, Triodos Investment Management
Mirte Bronsdijk, APG Asset Management
Michiel van Esch, Robeco
Ger Fehrenbach, PGGM
Marian Hogeslag, DoubleDividend Management
Geert-Jan Hoppers, MN
Frank Huitema, Telegraaf Pension Fund
Paul Lee, Aberdeen Standard Investments
Daniëlle Melis, General Pension Fund
Stap Narina Mnatsakanian, Kempen Capital Management
Hanna Waltsgott, Kempen Capital Management
Emanuele Fanelli, Aegon Asset Management
Djimmer Yetsenga, Achmea Investment Management

Daan Spaargaren, Eumedion
Diana van Kleef, Eumedion
Rients Abma, Eumedion