A Manifest Investigation into the Practical Problems  of Informed Voting Across EU Borders   Paul Hewitt Business Developm...
Agenda <ul><li>Introduction </li></ul><ul><li>We looked at cross border voting in Europe to answer 3 questions: </li></ul>...
The Manifest “Manifesto” <ul><li>Investors should have an opportunity to exercise their shareholder rights by means of vot...
The Research - Background <ul><li>Shareholder Rights Directive  - Jan 06 </li></ul><ul><li>Empirical study performed by a ...
Outline of the Research <ul><li>Identify major impediments to the voting process in Europe; </li></ul><ul><li>Contrast sta...
The importance of Europe Source: International Financial Statistics Online, International Monetary Fund
The Shareholder Rights Directive <ul><li>Non-resident shareholders should be able to exercise their rights in relation to ...
What issues were identified? <ul><ul><li>Share blocking (especially share blocking at the custodian level); </li></ul></ul...
The chain of intermediaries issue <ul><li>Time factors </li></ul><ul><li>the amount of time needed to pass meeting related...
Intermediary Issues Continued <ul><li>The lack of audit trails </li></ul><ul><li>the absence of the process that would ena...
‘ Peak season’ - how “big” is the problem?
The “European” Element
Tempus Fugit <ul><li>In only eight of the 18 European markets, are foreign investors provided with sufficient time to make...
Timely, informed voting? 2 n/a n/a 2 37 United Kingdom  4 5 7 9 26 Switzerland 3 6 n/a 6 24 Sweden  2 5 5 5 37 Spain  6 6 ...
The net effect for shareholders… [i]  From the date when Notice of Meeting, including full agenda and meeting attendance r...
What could help? <ul><li>Providing sufficient and meaningful information further in advance of the meeting on a consistent...
Summary <ul><li>Audit is being rushed to meet artificial deadlines – at whose expense? </li></ul><ul><li>Increased burden ...
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A Manifest Investigation into the Practical Problems of Informed Voting Across EU Borders.

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Paul Hewitt, European Business Development Manager - Manifest Voting Agency Ltd. - UK

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A Manifest Investigation into the Practical Problems of Informed Voting Across EU Borders.

  1. 1. A Manifest Investigation into the Practical Problems of Informed Voting Across EU Borders Paul Hewitt Business Development Manager Manifest Information Services Ltd November 2007 [email_address]
  2. 2. Agenda <ul><li>Introduction </li></ul><ul><li>We looked at cross border voting in Europe to answer 3 questions: </li></ul><ul><ul><li>What are the problems? </li></ul></ul><ul><ul><li>What are the causes? </li></ul></ul><ul><ul><li>What are the remedies? </li></ul></ul><ul><li>Q&A </li></ul>
  3. 3. The Manifest “Manifesto” <ul><li>Investors should have an opportunity to exercise their shareholder rights by means of voting at the general meetings regardless of where they reside; </li></ul><ul><li>The voting process should be made as simple and straightforward as possible to ensure maximum shareholder participation; and </li></ul><ul><li>Voting should not be a box-ticking exercise, which means that investors should have a chance to make informed choices about their voting decisions. </li></ul>
  4. 4. The Research - Background <ul><li>Shareholder Rights Directive - Jan 06 </li></ul><ul><li>Empirical study performed by a Manifest Research Analyst – Eugenia Jackson </li></ul><ul><li>Over 9 months of detailed investigation </li></ul><ul><li>18 European markets </li></ul><ul><li>Interviews with investors, custodians, market counterparties </li></ul>
  5. 5. Outline of the Research <ul><li>Identify major impediments to the voting process in Europe; </li></ul><ul><li>Contrast statutory requirements and best practice provisions in each European market with the practices of issuers incorporated in that market; </li></ul><ul><li>Identify the problems associated with the use of the chain of intermediaries as the predominant model for cross-border voting in Europe; </li></ul><ul><li>Compare voting deadlines set by issuers/tabulators in each European market with vote cut-off dates set by intermediaries in the chain; and </li></ul><ul><li>Identify the underlying causes of existing vote cut-off dates for institutional investors, and establishing what factors influence the setting of an ultimate cut-off date. </li></ul>
  6. 6. The importance of Europe Source: International Financial Statistics Online, International Monetary Fund
  7. 7. The Shareholder Rights Directive <ul><li>Non-resident shareholders should be able to exercise their rights in relation to the general meeting as easily as shareholders who reside in the Member State in which the company has its registered office. </li></ul><ul><li>Shareholders should be able to cast informed votes at, or in advance of, the shareholders meeting, no matter where they reside. </li></ul><ul><li>All shareholders should have sufficient time to consider the documents intended to be submitted to the general meeting and determine how they will vote their shares. </li></ul><ul><li>Timely notice should be given of the general meeting and shareholders should be provided with the complete information intended to be submitted to the general meeting. </li></ul><ul><li>Voting without attending the general meeting in person, whether by correspondence or by electronic means, should not be subject to constraints. </li></ul>
  8. 8. What issues were identified? <ul><ul><li>Share blocking (especially share blocking at the custodian level); </li></ul></ul><ul><ul><li>Power of attorney; </li></ul></ul><ul><ul><li>Re-registration of shares; </li></ul></ul><ul><ul><li>Record date; </li></ul></ul><ul><ul><li>Length and inefficiency of the chain of intermediaries; </li></ul></ul><ul><ul><li>Availability and timeliness of information; </li></ul></ul><ul><ul><li>Custodian/sub-custodian cut-off dates; </li></ul></ul><ul><ul><li>Manual involvement in the voting process and proprietary message standards used by securities intermediaries; </li></ul></ul><ul><ul><li>Lack of audit trails; </li></ul></ul><ul><ul><li>Stock lending; </li></ul></ul><ul><ul><li>Wet signatures; </li></ul></ul><ul><ul><li>Format of proxy cards; </li></ul></ul><ul><ul><li>Physical attendance; </li></ul></ul><ul><ul><li>Adjournment of meetings; </li></ul></ul><ul><ul><li>Voting restrictions; </li></ul></ul><ul><ul><li>Cumbersome registration process; </li></ul></ul><ul><ul><li>Investors’ unwillingness to disclose identity/bearer shares; </li></ul></ul><ul><ul><li>Absence of distance voting culture in Europe. </li></ul></ul>
  9. 9. The chain of intermediaries issue <ul><li>Time factors </li></ul><ul><li>the amount of time needed to pass meeting related information and documentation through the chain of intermediaries; </li></ul><ul><li>Bundling of proxy voting with other services </li></ul><ul><li>Net result: investors’ inability to use a service provider of choice, insufficient transparency in the pricing of the voting service, frequent dissatisfactory quality of voting services, and a distortion of competition in the voting services market; </li></ul><ul><li>Lost votes </li></ul><ul><li>Attributed to the wide use of pooled accounts by securities intermediaries, where the failures in the reconciliation process can lead to rejected votes; </li></ul>
  10. 10. Intermediary Issues Continued <ul><li>The lack of audit trails </li></ul><ul><li>the absence of the process that would enable a voting service provider to provide an institutional investor with the feedback that the votes reached the issuer; </li></ul><ul><li>Manual processing </li></ul><ul><li>Manual involvement in the voting process; </li></ul><ul><li>Low expertise </li></ul><ul><li>The incompetence of securities intermediaries in proxy voting issues; </li></ul><ul><li>Communications issues </li></ul><ul><li>Miscommunication between intermediaries in the chain; and </li></ul><ul><li>Low priority </li></ul><ul><li>Lack of resources in proxy voting and priority for voting. </li></ul>
  11. 11. ‘ Peak season’ - how “big” is the problem?
  12. 12. The “European” Element
  13. 13. Tempus Fugit <ul><li>In only eight of the 18 European markets, are foreign investors provided with sufficient time to make informed voting decisions, even if there are controversial issues on the agenda or engagement with the company is needed; </li></ul><ul><li>In five of the markets, investors should have enough time to make informed voting decisions on routine issues, but may not have enough time to do additional research or engage with the issuer; and </li></ul><ul><li>In the remaining five markets, investors may not have sufficient time to make informed voting decisions based on a thorough consideration of the meeting-related information and analysis of the company’s performance. </li></ul>
  14. 14. Timely, informed voting? 2 n/a n/a 2 37 United Kingdom 4 5 7 9 26 Switzerland 3 6 n/a 6 24 Sweden 2 5 5 5 37 Spain 6 6 10 n/a 26 Portugal 2 3 n/a 0 28 Norway 5 7 7 7 29 Netherlands 8.5 8.5 8.5 8 12 Luxembourg 2 2 2 11 22 Italy 2 n/a n/a 2 32 Ireland 6 6 6 n/a 12 Greece 2 n/a n/a 2 35 Gibralter 2 7 21 15 48 Germany 3 n/a n/a 3 31 France 6 5 n/a 11 13 Finland 2 5 n/a n/a 21 Denmark 4 5 5 5 17 Belgium n/a 4 6 n/a 23 Austria VOTING DEADLINE REGISTRATION DEADLINE SHARE BLOCKING DATE RECORD DATE Notice of meeting & annual report & accounts before AGM (Avg Calendar Days) COUNTRY
  15. 15. The net effect for shareholders… [i] From the date when Notice of Meeting, including full agenda and meeting attendance requirements, and Annual Report and Accounts became available to shareholders. [ii] Data provided by a number of institutional investors using the voting services. 24 to 26 7-9 33 36 United Kingdom 7 to 9 14-16 23 26 Switzerland 4 to 8 13-17 21 24 Sweden 23 to 26 8-11 34 37 Spain -2 to 8 8-18 16 19 Portugal 11 to 13 12-14 25 28 Norway 12 to 16 10-14 26 29 Netherlands -7 to -1 10-16 9 12 Luxembourg 5 to 9 10-14 19 22 Italy 20 to 21 8-9 29 32 Ireland -4 to -1 10-13 9 12 Greece 23 9 32 35 Gibraltar 31 to 34 11-14 45 48 Germany 14 to 18 10-14 28 31 France -4 to - 9 14-19 10 13 Finland 5 to 8 10-13 18 21 Denmark 0 to 2 12-14 14 17 Belgium 7 to 9 11-13 20 23 Austria Average amount of time for making voting decisions (calendar days) Average vote cut-off dates (calendar days before AGM) [ii ] Average availability of meeting information to investors (calendar days before AGM) Average release of meeting information and materials (calendar days before AGM) [i ] Country
  16. 16. What could help? <ul><li>Providing sufficient and meaningful information further in advance of the meeting on a consistent basis across Europe; </li></ul><ul><li>Separate annual general meeting and dividend dates to reduce stock lending activities around the annual general meeting. </li></ul><ul><li>Eliminate bearer shares in favour of electronic register; </li></ul><ul><li>Possessing a legal framework that allow delegation of voting authority to third parties under a power of attorney; </li></ul><ul><li>Adoption of open standards and framework for voting messages; </li></ul><ul><li>The use of segregated, rather than pooled, accounts (unless a voting service provider has the necessary powers of attorney to vote on behalf of all the investors in a pooled account); and </li></ul><ul><li>Enforcement of EU Competition Law with regards to bundling of services by Banks and other securities intermediaries which are holding back innovation and market development. </li></ul>
  17. 17. Summary <ul><li>Audit is being rushed to meet artificial deadlines – at whose expense? </li></ul><ul><li>Increased burden on shareholders for active oversight </li></ul><ul><li>Issues in Europe are more complex and time consuming </li></ul><ul><li>Significant time, data and resource constraints </li></ul><ul><li>Resources have not been increased as more markets covered </li></ul><ul><li>“Europe Day” phenomenon </li></ul>

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