1 (8) Page 21 June 2005 Date European Commission DG Internal Market and Services Markt-COMPLAW@cec.eu.int Dear Sirs Fostering an Appropriate Regime for Shareholders Rights a response to Commission s Second Consultation Paper The Internal Market Directorate General ( DGMarkt) drafted a second document for consultation as to the possible structure and contents for a proposal for a directive on shareholders rights. The second Consultation Paper, dated 13 May 2005, included an invitation to the interested parties to provide their responses no later than 15 July 2005. Nordea Group welcomes the Consultation Paper and thanks for the opportunity to bring its opinions into DGMarkt s knowledge for the purposes of forwarding the Directive on Shareholders Rights. Nordea s response is found in appendix 1. Nordea s contact persons in this matter are Maria Snöbohm, Senior Legal Counsel, tel. +46 8 614 72 43, e-mail: maria.snobohm@nordea.com and Camilla Wahlstedt, Legal Counsel, tel. +46 8 614 97 44, e-mail: camilla.wahlstedt@nordea.com. Yours faithfully Nordea Bank AB (publ) Maria Snöbohm Senior Legal Counsel Camilla Wahlstedt Legal Counsel Nordea Bank AB (publ) Hamngatan 10 H 50 105 71 STOCKHOLM Sweden www.nordea.com Company registration number 516406-0120, the board is domiciled in Stockholm, Sweden
Appendix 1 2(8) Second Consultation Paper on Fostering an Appropriate Regime for Shareholders Rights Nordea Group as Interested Party Nordea is the leading financial services group in the Nordic and Baltic Sea region with approximately EUR 284.2 billion in total assets. Nordea is a world-leading Internet banking and e-commerce operation with 4.1 million customers and its positions in the Nordic banking markets are 40 per cent in Finland, 25 per cent in Denmark, 20 per cent in Sweden and 15 per cent in Norway. Nordea has the largest customer base of any financial services group in the region, including 9.6 million personal customers, 930,000 corporate customers and 1000 large corporate customers. Nordea is a leading asset manager in the Nordic financial market with EUR 136 billion (including private banking) under management and has the most comprehensive distribution network in the region including 1,150 bank branch offices and leading telephone banking and Internet services. The Nordea share is listed in Stockholm, Helsinki and Copenhagen. Nordea has a position in the subject matter of the Consultation Paper in the following areas: issuer of equity and debt instruments at several markets, asset manager, broker, custodian for foreign and local securities, organiser of General Meetings, holder of shareholder registers in Denmark and Norway, a leading proxy agent in Finland, and a company with approximately 485.000 shareholders, divided mainly in Denmark (200.000), Finland (197.000) and Sweden (88.000). Hence, any amendments in the regulation will affect Nordea in various business areas. Preliminary remark Shareholders influence in the company is exercised at the shareholders meeting, which in the Nordic countries is the company s highest decision-making body. To create the best possible conditions for the active exercise of the ownership role, the shareholders meeting should be conducted in such manner that as high a percentage as possible of the total number of shares and votes can be represented at the meeting and that active participation on the part of current shareholders in the discussions and decision making is facilitated. However, it cannot be stressed enough that the decision to use its rights is and should be the shareholder s entirely own. 1. Scope Yes, we agree with the suggestion that the scope should be limited to listed companies and not UCITS funds that should mostly be considered as investment products. 2. The ultimate investor or ultimate accountholder 1) No. 2) Not applicable.
Appendix 1 3(8) 3. Stock lending and depositary receipts Stock lending Nordea believes that the Shareholders Rights initiative should focus on its main targets and only briefly state the status of neighbouring fields such as stock lending. 1) Nordea does not consider that this is a major item that needs to be considered in this connection, but can be left to other regulatory projects, e.g. MiFID. Such a solution would also help focus this project. But if stock lending should be dealt with the proposal is acceptable and should also cover delayed deliveries, having the same effect. Even if the time frame in the latter case normally is more narrow, it is usually not regulated between the parties, contrary to the case with stock lending. 2) The regulation of intra partes obligations between the intermediary and the Owner (Ultimate Investor) should not be brought into discussion here. Depositary receipts Yes, the purpose of dual-listing is to offer the investors located in one market place a possibility to invest in companies primarily listed on another market place. To promote the equality of shareholders, the holders of depository receipts should be considered shareholders in all possible aspects, notwithstanding the fact that dividend payment procedures and currencies may create an additional burden. 4. Pre General Meeting conditions Notice periods We can agree with the times suggested for the latest day for first notice but we believe the notice period should not be set not only with a latest day but also with an earliest day, both for annual General Meetings and for other shareholders meetings. This is the legislative technique used in the Nordic countries. The reason for this being that notices issued to early are inconvenient, especially with regards to new shareholders. But the same reasoning would probably also be applicable to cross-border shareholders. We therefore propose that for annual General Meetings in listed companies the notice shall be issued not earlier than six weeks before and not later than four weeks before the meeting. For other shareholders meetings the period is not earlier than six weeks before and not later than two weeks before. We also think that the times should be set in calendar days, and not business days, since it would be easier for the international investing community to follow. Content of the notice Nordea finds the minimum standard otherwise reasonable but believes that the description of voting procedures will become blurry if published in the notice. Therefore, Nordea wishes to propose that the exact procedures are dealt with in detail at the company s website.
Appendix 1 4(8) As regards the last bullet point, the indications should also state when the full information will be available, if not so at the time of publishing the notice. Information relevant to the General Meeting Yes we agree in principal, but we think the time period should be shorter and set in calendar days, as a suggestion 14 and 7 calendar days, for the same reasons as stated above. Dissemination, and language, of the meeting notice and materials No, the dissemination and translation of materials will be a burden to smaller listed companies and will result in even higher costs. The English language, which the proposed minimum standard in practice would result in, should not be set as standard for all companies irrespective of size, ownership profile and other criteria. In the Swedish Code of Corporate Governance it is stated that the company is to consider whether the shareholders meeting is to be simultaneously translated (from Swedish) in whole or in part and whether the material presented by the company is to be translated into any other language as warranted by the ownership structure and if financially feasible. We like to firmly stress that we believe this should primarily be the company s decision and not one to be decided by the GM. Specific section of the issuer s website dedicated to the General Meeting 1) Yes, we agree this should be the Member States obligation. A rule of this kind is found in the Swedish Code of Corporate Governance. 2) Yes we agree with the proposal but would like to point out that the part on correspondence and proxy voting only can be included when applicable. 5. Admission to the General Meeting share blocking 1) Share blocking does not exist in Sweden. According to the description in the second consultation document it seems obvious that it should be abolished. 2) The introduction of record date concept in all Member States is warmly supported. However the record date market practice should be harmonized. Therefore it is important that the work is co-ordinated with the Giovannini Group, which is working on the same issue. Furthermore we would like to mention that FBE has prepared recommendations to harmonize record date concept related to dividend/interest payments. The record date should not be set too close to the date of the meeting in order to let the intermediaries perform their tasks. Nordea proposes that DGMarkt studies a possibility to advocate a common record date for all European markets, such record date not being set closer than ten (10) calendar days to the meeting. The system with a record date is already in place in Sweden and working well.
Appendix 1 5(8) 6. Shareholders rights in relation to General Meeting Electronic participation in General Meeting We agree that barriers to the development of participating in the GM via electronic means should be removed and prevented. Participation via electronic means, especially exercising of voting rights, is very complicated and costly (see below). Furthermore, special attention should be given to the verification of shareholder identity when the electronic participation is feasible. In the Swedish Code of Corporate Governance the following is stated regarding distance participation: At each shareholders meeting, the company is to provide shareholders with the option of following or participating in the meeting from another location in the country or abroad with the help of modern communication technology if it is warranted by the ownership structure and financially feasible. We strongly believe that this primarily should be the company s decision and not one to be decided by the GM. Right to ask questions Each individual shareholder should have the right to ask questions orally at the GM and in writing (including by electronic means) in advance of the GM. The questions should, however, be of relevance for matters on the agenda or concern circumstances that may affect the evaluation of the company s financial position. If the possibility is introduced to participate in a GM at a distance via electronic means one has to take into consideration the risk that irrelevant questions are being asked because of the relative anonymity in the situation. The right to ask questions only makes sense if the company is obliged to reply to the questions asked. However, there should be a right not to reply when this could cause the company serious harm. The company, in particular, should be under no obligation to disclose business secrets and should have the right not to answer questions on price sensitive issues. The answers should be given orally during the meeting and included in the minutes of the GM. The responses should be made available to all shareholders as part of the minutes of the GM, which are available to the shareholders upon request. We however object to any proposal on a dedicated section on the company s web-site for such responses. The statement is correct if what we have stated above is taken into account. Rights to add items to the agenda and table resolutions Each individual shareholder, irrespective of the number of shares, should have the right to table resolutions and place items on the agenda. The issues must be of relevance to the GM. The request should also be received by the company not later than one week prior to the earliest time that notice of the GM may be issued.
Appendix 1 6(8) Voting by correspondence 1) No, neither the Member States nor the companies should have an obligation to make nonpresent electronic or other correspondence voting an option to all shareholders. We strongly object to introduce obligatory provisions on voting in absentia. This is based on experiences drawn by Nordic companies. A lot of complicated matters are not yet solved in a sufficient way: the procedure to identify the shareholders in a reliable manner how to deal with interruptions in electronic communication during the GM, especially during voting should the shareholders be able to participate from their offices or homes how to treat votes cast in advance by post when proposals on the matter in question have been altered during the GM how to handle a GM which is postponed. It can be added that a GM held simultaneously at different locations by use of telecommunication facilities incurs huge additional costs both of technical and administrative nature. 2) Yes, but see what is stated above on electronic participation. Proxy voting 1) Yes. 2) Yes, and this should in particular be confirmed as a rule superior to any domestic regulation or the companies articles of association. In practice, any limitation on voting power should not be applicable to proxies but only to each Owner. 3) Yes, however it will be important to verify the identity of the person or entity providing the appointment. It could be appropriate to stipulate that a proxy should be valid for 12 months or to the next annual GM and that it should be possible to sign it by an electronic signature. 4) Yes, a proxy represents s shareholder in its full capacity and shall with regards to the GM have all the shareholder s rights just as if the shareholder was present in person. 5) No, the company may not bear the expense of collecting proxies. 6) The answer is yes in principal however see remarks stated above under Electronic participation in GM and Voting by correspondence. EU Proxy form: this should be studied carefully. The requirements differ in each Member State, and it may not be feasible to start the harmonisation of General Meeting practises with the proxy form. However, Nordea promotes the idea of keeping the EU Proxy Form on the agenda in future processes if not realised in the ongoing process.
Appendix 1 7(8) 7. Position of Intermediaries in the cross-border voting process Definition of intermediary Yes, the definition is acceptable considering that it derives from the UNIDROIT work. A wider definition is undesirable. The proposed definition keeps open the market for any intermediaries and is likely to prevent unreasonable standards. However, Nordea wishes that the wordings maintaining securities accounts and regular activity be reconsidered. The added value of reserving the right to collect and forward orders to parties maintaining account is unclear. On the other hand, any party forwarding voting orders should have the same obligations irrespective of the regularity of the service. Registration as nominees Yes, Nordea supports the idea that the investment market is given the information that the intermediary (the party maintaining the account) acts on behalf of the Owners. It is very important however that the Owner always can stay anonymous if the Owner wants to. Being granted a power of attorney Yes, Nordea finds that the Owner of the shares shall have an undisputed right to use the voting power, and if that requires that the intermediary provides a power of attorney, then that should be the intermediary s legal obligation. However, the set up in the Member States should consider the Owner as the primary holder of the administrative rights related to the shares without creating or promoting artificial obstacles that reduce the efficiency of the proxy voting process. Nordea finds that the reversed procedure described in the paper is likely to disturb the investors and participants from all other markets. It seems like the proposed standard only applies to such legal systems not recognising the owner as the real owner, and if used this should be mentioned in the standard as such. Voting upon instructions 1) Yes. It should be the intermediaries right to decide upon the most efficient method of providing safekeeping services to the investment market. This right should be promoted regardless of the domicile of the Owner. 2) Yes, the intermediaries shall have the right to act on behalf their clients instructions, and, on the other hand, not be entitled to act without an explicit order to do so. 3) Yes, the intermediaries should not be considered as shareholders in either the domestic legislation or the companies articles of associations. The various shareholders shall not be excluded their right to cast individual votes. It is important to note that the possibility for the intermediaries or someone holding power of attorney to cast split votes only applies to each shareholder separately.
Appendix 1 8(8) 8. Communications following the General Meeting Dissemination of voting results 1) Companies should not be obliged to automatically send the Minutes including the results of votes from the GM to all shareholders. But, of course, the shareholders should have a right to get this information upon request, for instance by sending an e-mail to the company. The Minutes will also be posted on the company s website. The question may be raised whether publishing the register of voters on the company s website might be in conflict with the European Community Data Protection Directive. 2) Yes and no. On one hand, all shareholders should be granted efficient access to the resolutions and the proceedings of the meeting. However on the other hand, the dissemination obligation shall be limited in scope. The companies should have some freedom about the quality and quantity of information they publish on their own websites. Thus posting the register of voters should not become obligatory information. 9. Other suggestions None.