Are You Ready For SRD II?

It’s time to get ready. After years of consultations and partial implementations, the final European Union-wide regulations of the revised Shareholder Rights Directive (“SRD II”) come fully into force in September, bringing new requirements for companies, institutions, and intermediaries throughout the investment ecosystem.

Proxy voting in Europe is undergoing an overhaul. Shareholder rights are being enhanced, as EU member states implement a modernised regime for disclosure and record keeping, including vote confirmation and electronic communications. What gets voted on is also evolving, with remuneration policies now standard in most markets and revised materiality thresholds for related party transactions. And once the results are in, investors are subject to new reporting requirements on their voting, engagement and stewardship.

For institutions that have kept pace with advisory stewardship codes and emerging best practice, the implementation of SRD II will mostly come down to the formalisation of currently voluntary practices — but there are some important new reporting requirements that may force a review of their existing voting workflows and tools. For investors who have yet to publicly (or even internally) develop their approach to stewardship and engagement, now is the time to catch up.

On the other side, companies across Europe will be adding one of the most contentious types of proposals to their shareholder meeting agenda. Boards in those markets may not be familiar with remuneration voting yet — but their international investors are. Companies will need to familiarise themselves with shareholder expectations on the structure and quantum of remuneration, along with how the details are disclosed, to avoid the risk of a pay revolt.

The directive and associated regulation will apply across the EU but many provisions are being implemented by the member states themselves, including the details of vote confirmation and specific thresholds for shareholder identification. Keeping track of exactly what will apply to whom where and when is complicated to say the least.

Glass Lewis is here to guide you through the new regulations

• Our SRD II Resource Hub provides an explanation of all the new requirements, along with tear sheets setting out the details, country by country.
• Our Viewpoint voting platform is being enhanced to provide a clear indication that a vote was “Received” in the local market and “Counted” by the company, and our robust reporting suite also allows clients to generate data extracts or formatted reports that can be used to isolate significant votes for disclosure.
• We provide electronic validation that vote instructions were received by the distributor within an hour of vote transmission, with confirmation of additional local market processing usually within 24-48 hours.
• We’re maintaining our industry-leading approach to executive pay analysis, now expanded to cover the new markets facing remuneration votes — and with staffing reviewed to ensure that our Proxy Papers aren’t delayed by the additional proposals.
• Our engagement program provides companies the opportunity to learn about Glass Lewis’ approach to the revised voting requirements and new agenda items directly from our analysts — all free of charge.
• Glass Lewis itself is fully compliant with SRD II. In addition to updating our systems to comply with all new data transmission requirements, Glass Lewis is a founding signatory of the leading industry best practice code for proxy advisors. Reporting against a best practice code is a requirement of SRD II.

Glass Lewis is committed to supporting our clients as these new regulations come into effect. Contact us by clicking the button below to learn more about how our Viewpoint voting platform and Proxy Paper research reports can work with your reporting workflow.