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Following the publication of the ESMA Final Report and Feedback Statement on the Consultation Regarding the Role of the Proxy Advisory Industry in February 2013, a number of industry members formed a committee under the independent chairmanship of Prof. Dr. Dirk Andreas Zetzsche, LL.M. (Toronto), to develop an industry code of conduct. The "Best Practice Principles for Providers of Shareholder Voting Research & Analysis" were published in April 2014. With this report, the chair aims to make the committee's work and discussions transparent to facilitate the application of the provisions and enhance understanding of the reasoning behind their adoption. The report also aims to enhance transparency and understanding on the functioning of Providers of Shareholder Voting Research & Analysis (to which is commonly referred to as the proxy advisors) and their role in corporate governance and assist in creating a more informed discussion. The report is structured as follows: After an introduction (sub 1.), I describe the composition and work organization of the drafting committee for the Principles (sub 2.), before I explain the Committee's as well as the Chair's position on the certain provisions of the Principles (sub 3.). The report discusses, inter alia, the scope of the Principles, the Committee's general approach, the delineation of responsibility between proxy advisors, institutional investors and issuers that forms the basis of the Principles, the attitude of the industry towards local governance standards, and how Signatories should deal with conflicts of interests. A major section of the report is devoted to the communication between issuers and Providers of Shareholder Voting Research & Analysis (sub 4.). In particular I explain why a mandatory distribution of research report to issuers would put the providers' commitment vis-à-vis their clients (the investors) at risk. I further undertake to outline how the Principles may be enforced (sub 5.) and describe the next steps on the Committee's agenda (sub 6.). Three further documents issued by the Committee are annexed to the report: I. The "Best Practice Principles for Providers of Shareholder Voting Research & Analysis" discussed in the report, II. The consultation document distributed by the Committee to stakeholders in fall 2013, and III. The Feedback Statement on the Consultation.

Abstract: The key issue concerning shareholder transparency rules, and the related rules on acting in concert (Europe), or the voting group concept (U.S.) is enforcement. Rather than thinking about appropriate enforcement measures, jurisdictions such as the UK and Switzerland decided in favor of Economic Ownership Disclosure. The current debate in the U.S., on the European and national level of some European jurisdictions is moving in the same direction. This article examines a different option which is the better enforcement of existing transparency rules. In order to counter secret acquisition strategies, similar to antitrust leniency and "protected disclosure" (i.e. whistle blowing) rules, governments are best advised to assign a reward for disclosure. Under the reward model presented here, the initial stock price reaction reflects the value of the information previously hidden from the market. The first participant of a scheme who discloses the holdings of all scheme participants is to be assigned the difference between the price of the target's voting shares ex ante and ex post disclosure, calculated on the basis of the participants' joint holdings of shares (Announcement Premium). Distinguishing between schemes based on the equity value of the parties involved (Equity Strategy) – commonly referred to as wolf packs - and schemes where an acquirer seeks to create a large stake based on derivatives (Service Strategy), assigning the Announcement Premium to the first entity disclosing the scheme's holding and intentions is likely to counter Equity Strategies efficiently. The Service Strategy is countered effectively by granting the Announcement Premium to agents that act on behalf of the intermediaries (i.e. to bank employees).

This paper analyses the rules regarding the internet-based exercise of shareholder rights for public corporations incorporated in Canada, France, Germany, the U.S. (DelGCL & RMBCA), the UK and Switzerland. The traditional doctrine associates information, communication and voting with shareholder meetings. In addition, shareholder meetings regularly prompt reviews of management's activities exercised on behalf of shareholders by accountants or the judiciary. The analysis reveals that the current regimes of shareholder meetings merely provide for voting and information in the context of a digital environment, while communication and review is usually not replicated. The lack of all functions of traditional shareholder meetings is one reason of why exclusively virtual shareholder meetings have not gained widely spread acceptance across jurisdictions. Another reason is that a well-fitting design for the web-based exercise of shareholder rights does not yet exist. Thus, the paper develops an advisable design of Virtual Shareholder Meetings that replicates all for functions of traditional shareholder meetings, while it is likely to reduce shareholder apathy at the same time. It argues that enabling more frequent opportunities for voting is the logical consequence of the developments of continuous disclosure requirements and continuous buy/hold/sell-decisions by market participants. Therefore, the virtual exercise of shareholder rights should be achieved through (1) liberalizing currently existing legislative and practical barriers, and in particular, time and place restrictions on shareholder meetings; (2) re-integrating analyst and institutional investor meetings in the process of shareholder meetings, and (3) substituting for the traditional face-to-face accountability of managers to shareholders through specific electronic means. The latter involves, specifically, the use of RSS-Feed and XBRL-technologies for gathering and evaluating information, the use of the company's website as the central communication platform for management to shareholders and shareholders to shareholders, and the election of an independent shareholder rights manager (firm) by the shareholder body with procedural, technical, and organizational authority for organizing the exercise of shareholder rights. Ideally, the blueprint presented herein achieves the harmonization of voting behavior and market reactions, thereby furthering market efficiency.

Part B. of the paper compares the basic concepts of shareholder control in Anglo-America and some states of Continental Europe. It introduces a new categorization between Implicit and Explicit Systems of Corporate Control. The first category refers to statutes that are enacted and construed with the belief that market forces influence managers. Shareholder rights to be exercised in direct contact with the corporation are thought to be relatively weak. This system is established in the Anglo-American world. In contrast, direct shareholder influence through voting and (even minority) shareholder monitoring constitute the fundaments of the Explicit System that traditionally prevailed, for example, in France and Germany. This paper provides historical, statutory and new empirical evidence from some Continental jurisdictions, and in particular Germany. It concludes that in Germany, shareholder meetings are part of Corporate Governance, while the Anglo-American corporate world traditionally understood this term to include only inter-board relationships. Part C. analyses the questions of whether, how and why Corporate Governance systems converge. This study suggests that Corporate Governance systems are likely to develop in Convergence Cycles: If a legal regime provides a particularly efficient solution to a specific problem, this solution will eventually be adopted by other Corporate Governance systems with an inferior system in respect of such problem. These Convergence Cycles will finally overcome the forces against formal convergence. The proposition of Convergence Cycles draws on historical, as well as new statutory and empirical evidence, collected by the author. Part D., finally, analyses the likely impact of convergence on ownership structures. It is likely that the answer to the question of which ownership structure is efficient depends on the stage of the business cycle that the firm is at. Firms within the same stage are likely to become more and more similar with respect to their ownership structures, until they reach an equilibrium that is set at a specific point for a particular group of firms. Thus, this paper adds a dynamic perspective to the static views that presently prevail in the debate upon the convergence of ownership structures.

The market for standard software shows an inexorable tendency towards concentration. Whereas such a development might be considered efficient due to the market's nature as a natural monopoly, it could also require stronger regulation, similar to other concentrated industries. This paper analyzes to what extent the existing legal frameworks under U.S. and European intellectual property and antitrust law mitigate pro-concentration effects. It characterizes the standard software market as an industry in need of regulation and reconsiders the current efficiency-focused approach in favor of measures that strengthen competition as a source of rivalry. Rather than considering efficiency arguments as "all-or-nothing" justification for otherwise anti-competitive conduct, as under the Chicago School concept, the concept proposed in this paper considers the "efficiency" criterion to merely limit the remedies imposed by adjudicators. ; 0013

Around the world, regulators and policymakers are working to support the development of financial technology (FinTech) ecosystems. As one example, over 50 jurisdictions have now established or announced "financial regulatory sandboxes". Others have announced or established "innovation hubs", sometimes incorporating a regulatory sandbox as one element. This article argues that innovation hubs provide all the benefits that the policy discussion associates with regulatory sandboxes, while avoiding most downsides of regulatory sandboxes, and that many benefits typically attributed to sandboxes are the result of inconsistent terminology, and actually accrue from the work of innovation hubs. The paper presents, as the first contribution of its kind, data on regulatory sandboxes and innovation hubs and argues that the data so far available on sandboxes does not justify the statement that regulatory sandboxes are the most effective approach to building FinTech ecosystems. Given that regulatory sandboxes require significant financial contributions, sometimes new legislation, and intense regulatory risk management, and that sandboxes do not work as well on a stand-alone basis (i.e. without an innovation hub), while innovation hubs alone can provide more significant benefits in supporting the development of a FinTech ecosystem, regulators should focus their resources on developing effective innovation hubs, including in appropriate cases a sandbox as one possible element.