New draft Dutch stewardship code looks at short positions, share borrowing

The Dutch corporate governance body Eumedion has unveiled a draft Stewardship Code whose provisions, around short positions and share borrowing, mean it is probably the most progressive in the world.
The first Stewardship Code was developed in the UK in 2010 and the idea has since taken off around the world.
Now Eumedion has developed one for the Dutch market via a working group comprising senior figures from leading pension funds and asset managers (see below).
A key principle concerns borrowing shares and short positions. It is No.11 of a set of 11 and is worth quoting in full: “Asset owners and and asset managers do not borrow shares for the sole purpose of exercising voting rights on these shares and will abstain from voting if their short position in the question is larger than their long position. They should recall their lent shares before the voting registration date or a general meeting of a Dutch listed company, if the agenda for that meeting contains one or more controversial resolutions.”
Another element is that an independent monitoring committee will be set up to oversee the application of the code. It will carry out an annual assessment of investors, look at internatonal developments and compile an annual report for the Eumdion board that will also go to the government.The code explains how asset owners and managers “can meet their stewardship responsibilities in a way that contributes to sustainable long-term value creation”. It also aims to make asset owners more accountable to their beneficiaries and asset managers more accountable to their clients.
The draft code supercedes the Eumedion Best Practices for Engaged Share-Ownership dating back to 2011. “Signing this code allows the asset owner or asset manager to publicly deonstrate its commitment to responsible and engaged share ownership and its compliance with minimum EU requirements,” the text states.
Non-Dutch investors (who hold almost 90% of Dutch listed companies’ shares) can choose to endorse the code. While the code is aligned with other international codes, it is an “elaboration” of the general principles of engaged ownership. It will now go out for a two-month consultation period ahead of it coming into force as of January 1 2018. Eumedion hopes it will become the de facto official stewardship code for the Netherlands.

Working Group:

Garmt Louw (chairman), Shell Pension Fund
Natalie Beinisch, Aegon Asset Management
Erik Breen, Triodos
Mirte Bronsdijk, APG
Michiel van Esch, Robeco
Ger Fehrenback, PGGM
Marian Hogeslag, DoubleDividend Management
Geert-Jan Hoppers, MN
Frank Huitema, Telegraaf Pension Fund
Paul Lee, Standard Life Aberdeen
Danielle Melis, General Pension Fund Stap
Narina Mnatsakanian, Kempen Capital Management
Djimmer Yetsenga, Achmea Investment Management