The Decoupling of Voting and Economic Ownership (IVOR nr. 88) 2012/1.4.2.2:1.4.2.2 Adverse Effects on Corporate Governance

The Decoupling of Voting and Economic Ownership (IVOR nr. 88) 2012/1.4.2.2

1.4.2.2 Adverse Effects on Corporate Governance

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Finally, in terras of corporate governance, transparency of the potential of empty voting can facilitate enforcement. Transparency enables issuers, shareholders and regulators to respond to, or prevent, abusive instances of empty voting. If, for example, it becomes clear that a hedge fund with substantial voting rights but a negative net economic interest is trying to determine the outcome of a shareholder resolution, this could spur the company or other shareholders into action, through litigation or otherwise. Moreover, the prospect of public scrutiny may discourage shareholders from engaging in empty voting in the first place.1 The European Commission has already applied this line of reasoning with respect to sovereign wealth funds, which raise concerns that, in some respects, are similar to concerns over empty voters.2

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