Manne Airaksinen 1 (6) Pierre Delsaux DG MARKT/G/4 European Commission B-1049 Brussels

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1 Manne Airaksinen Pierre Delsaux DG MARKT/G/4 European Commission B-1049 Brussels 1 (6) Second public consultation by the Commission SHAREHOLDERS' RIGHTS 1. Introduction There is no doubt that facilitating the exercise of shareholders rights is important. The issue is, if this is best done at the European level. It is clearly in the interests of the Member States to make their company laws as attractive as possible for the foreign investors. This should lead to legislation aimed at increasing the rights of shareholders and easing the use of those rights without interference from the EU. A careful analysis is required to find out to what exactly are the costs and benefits of the rules proposed. A well meaning measure could well end up reducing the total welfare of the companies and investors. It is easy to maintain, for example, that in order to facilitate voting by nonresident shareholders the minimum notice period should be longer. However, if minimum notice periods are prolonged especially in extraordinary general meetings, where special issues are taken to, then transactions need more time to be finalised something that adds costs and might in some cases simply rule out the transaction. This example is oversimplified, but it hopefully illustrates the fact that the national measures often are carefully balanced between the companies need for flexibility on the one hand and the shareholders rights on the other hand. A high percentage of foreign ownership is typical to the largest listed companies. The smaller ones tend to be overlooked by foreign investors and are mostly owned by resident shareholders. The fact is that a vast majority of listed companies in Europe have negligible foreign ownership. This should be reflected in the eventual directive. Especially, a directive should not increase costs of arranging general meetings in companies that have no or have very little foreign ownership. Confederation of Finnish Industries EK P.O.Box 30 (Eteläranta 10), FI Helsinki, Finland Telephone Telefax ek@ek.fi Business ID Domicile Helsinki

2 CONFEDERATION OF FINNISH INDUSTRIES EK 2 (6) Generally speaking, if a directive is deemed necessary, it should: - recognize different systems of holding shares (direct vs indirect holdings); - concentrate on enabling rather than prescribing the companies to use different mechanisms that ease the use of the voting rights of non-residents; - not cause an increase in the costs of arranging general meetings; - not contain elements that prolong the duration of general meetings; - not contain elements that increase the risk of a decision by the general meeting being challenged in the courts especially not in the EU-courts; - leave the Member States room to further increase the rights of foreign shareholders and ease their participation in general meetings; - take into account needs of companies with respect to level of foreign ownership; - not, in any Member State, weaken the rights of shareholders, for example by setting too high standards for participation in the general meetings by electronic means. 2. Answers to specific questions 1. Scope. Yes. 2 The ultimate investor or ultimate accountholder 1. No. Defining ultimate investor is not a prerequisite for a potential directive. We are supportive of the reasoning of the Commission. 3. Stock lending and depositary receipts 3.1. Stock lending 3.2. Depositary receipts Yes? As stock lending is offered by professional intermediaries with standardized procedures, the adoption of such clauses would clarify the situation and be recommendable to include. However, the ultimate investor should always be able to opt out from such standard arrangement, thus be able to vote in spite of lendind, if he should so choose. Nevertheless we would like question whether this matter should be dealt at the EU level, since it concerns also other than EU based intermediaries.

3 CONFEDERATION OF FINNISH INDUSTRIES EK 3 (6) We agree in principle. However, we are not quite sure that the terms of the ADR s are always in conformity with this principle. If there are ADR s, which by agreement do not posses this right, a binding rule should not be enacted in the EU-level. 4. Pre general meeting communications Notice periods 1 and 2. We are not quite convinced that harmonization of notice periods is necessary. If harmonization should take place, the notice period, whatever it is, should be calculated from the record date, not from the GM date. Furthermore, the proposal of using business days for calculating the notice period, or calculating time spans in general, is unfamiliar to many member states and might cause problems in interpretation and make the laws of the member states more complex. Content of the notice - We oppose a requirement to give precise description of participation and voting procedures and requirements for voting at the GM in the notice. We are sceptical with the requirement to indicate where such information may be obtained. It should be kept clearly in mind that the vast majority of EU listed companies have negligible foreign ownership. To force all listed companies to explain the content of the law to investors is not appropriate. We are in general not in favour of legislation requiring companies to explain the content of the law to citizens that in all member states are presumed to know the law. Furthermore, there is always a danger of legal disputes as to what exactly is a precise description of the issues mentioned in the question and if the descriptions are correct in all respects. It is very difficult to understand what would be the right level of detail in the description. It should be noticed that some of the participation and voting (by proxy) procedures might depend on intermediaries and that the company might be unaware of these procedures. - Yes, we can support the idea of indicating where the text of the resolutions etc. may be obtained.

4 CONFEDERATION OF FINNISH INDUSTRIES EK 4 (6) Information relevant to the General Meeting See our comment on notice periods. Dissemination and language No. Once again a typical listed company should be taken as a starting point for legislation. In a vast majority of listed companies in Europe foreign ownership is not an issue. Therefore, the requirement should be written the other way around: if the shareholders demand, then the notice and documents should be produced in English. Normally the companies that have foreign shareholders do this voluntarily. It is in the interest of the company to translate the documents: there is no obligation for foreigners to buy shares in a company that is hostile to its shareholders. If this rule is adopted it should be made clear that the documents with legal significance are those written in the language of the company. Specific section of the issuer s website 1. Yes. 5. Share blocking 2. Yes and no. As stated above, we do not want to extend the regulatory burden of listed companies, the majority of which do not have relevant amount of foreign shareholders, by demanding an explanation of the law. Furthermore, the requirement to post a proxy is questionable as in Finland the companies themselves do not solicit or use proxies. Yes. However, the record date should be left for member states to decide. It should not be dealt with in any kind of EU-implementing measures. 6. Shareholders rights in relation to the general meeting 6.1. Electronic participation No. There are many practical difficulties with such a rule. If, for example, there emerges a new technical standard by which the identification of a shareholder would be accurate, easy and cheap, the prohibition of imposing new requirements could be interpreted as ruling out any

5 CONFEDERATION OF FINNISH INDUSTRIES EK 5 (6) requirement to use that standard. This should not be the outcome. Nevertheless such a rule should not be compulsory but merely making it possible for companies to provide shareholders with a possibility for participation via electronic means Right to ask questions We agree with the principle that the shareholders should have the right to ask questions. However, this should be done at the general meeting, and should not incur automatic public disclosure outside the context of the meeting. 6.3 Right to add items to agenda and table resolutions. 6.4 Voting Yes. Voting by correspondence 1. We do not apply the concept of voting by correspondence but we use powers of attorney. Voting by correspondence raises difficult questions if, e.g., there is a minimal change in the original proposal by the board or shareholder: how should the mailed vote be dealt with in that case? Both methods, i.e. voting by correspondence and proxy voting, should be mutually acceptable and left to discretion of member states which method they will implement to their national legislation. 2. See our reservations in 6.1. above. Proxy voting 1, 2, 3, 4, 5, 6: Yes. An EU-proxy form is an interesting idea that should be studied further. 7. Position of intermediaries in the cross-border voting process Definition of intermediary Yes.

6 CONFEDERATION OF FINNISH INDUSTRIES EK 6 (6) Registration as nominees Yes. However, in the text in the consultative document above the question it is stated that there would be no obligation for the intermediary to disclose the identity of its clients. We emphasize that in Finland all shareholders must be registered as shareholders if they want to participate in the GM. Such a registration is simple and cost efficient. The list of the shareholders that want to participate and thus register their shares becomes public and should remain so. There are various reasons why the names of the shareholders participating in the GM should be published, e.g. the potential yet theoretical legal liability of shareholders and the right for other shareholders to inspect the list of participants. Being granted a power of attorney Not relevant in Finland. Voting upon instructions 1-3: Yes. 8. Communications following the general meeting Yours sincerely, Dissemination of the voting rights Yes, even if we prefer a system where the minutes are sent by request. Confederation of Finnish Industries Manne Airaksinen Chief Policy Adviser