Internal Market and Services Commissioner Charlie McCreevy said: "The study provides a useful factual background to the issue of proportionality between capital and control – known as the "one share, one vote" issue. Previously we didn't have a clear picture of how this issue affects European listed companies and whether it has an impact on their economic performance. Now that these facts are on the table we will examine, with an open mind, the question of whether there is a need for Commission action in this field".

The study will provide input for an impact assessment that the Commission will be carrying out between now and autumn 2007.

Background

The study was commissioned in September 2006, following a public consultation carried out between December 2005 and March 2006 on future priorities in company law and corporate governance that confirmed the need for additional information on the factual situation in the EU regarding the issue of proportionality between capital and control. The objective of the study was to identify existing deviations from the proportionate allocation of capital and control across EU listed companies, and to evaluate their economic significance and whether such deviations have an impact on EU financial markets.

The objective was to obtain a picture that would be as comprehensive as possible. The scope of the study was therefore defined very broadly. It encompasses the review of such mechanisms as multiple-voting rights, voting caps and non-voting preferential shares, as well as of tools such as shareholders' agreements, cross-shareholdings and company pyramids.

The study scrutinizes the regulatory framework in 19 jurisdictions (including 3 from outside the European Union) and examines the situation of 464 listed European companies. The study also consists of a review of the available academic literature and empirical evidence on the proportionality principle as well as a survey of institutional investors whose objective is to assess what role the proportionality principle plays in their investment decision.

The study is available at:

http://ec.europa.eu/internal_market/company/shareholders/indexb_en.htm

See also FAQs (frequently asked questions) MEMO/07/222

Institutional Shareholder Services (ISS), Shearman & Sterling LLP and the European Corporate Governance Institute (ECGI) submitted the results of a Study on proportionality between ownership and control in EU listed companies to European Commission

After nine months of research, the facts and figures on proportionality between ownership and control were submitted to the European Commission by ISS and its partners Shearman & Sterling and the ECGI.

Last year, the European Commission commissioned a research report to understand an important corporate governance issue: the proportionality between ownership and control. This study is part of the Commission’s efforts to base any policy initiatives it might wish to take in this area on objective data. As Charlie McCreevy, European Commissioner for Internal Market and Services, said at the time of the launching of the initiative “The study represents the essential starting point for any further discussion on the adequacy of control to capital. It will provide a full, systematic picture of the essential features of Corporate Europe that the European public opinion is waiting for. Any discussion about how to move on, about possible initiatives in this area, needs to be based on sound facts.”

Those facts are now on the table. Some highlights of the Study, which covers nineteen countries, are:

“For ISS, this Study will have been a success if it contributes to shedding more light on the subject of proportionality and to fostering more transparency in the market place, for the benefits of listed companies as well as shareholders,” said Jean-Nicolas Caprasse, Managing Director of ISS Europe. “I’m convinced this objective has been achieved.”

“This is the first time a study surveys the potential availability of Control Enhancing Mechanisms and protective legal devices in nineteen jurisdictions. It shows that a broad range of mechanisms is available in most countries, even when they have different legal traditions”, said Christophe Clerc, European Counsel at Shearman & Sterling. “All countries apply the freedom of contract principle to varying degrees.”

Marco Becht, Executive Director of the ECGI said: “The ECGI is very pleased that independent research is having such a significant influence on the governance debate. This study shows CEMs are complex and deserve serious reflection. It is the first step towards systematic stocktaking and evaluation of the proportionality between ownership and control in EU listed companies, based on European data and realities.”