5.3.4 Summary of Findings

Recall that there are various barriers to cross-border voting in Europe, one of which is that, due to the complexity of modern day securities holding systems, the investor who bears the risk of the investment—the "ultimate investor"—may not be the person legally entitled to vote. Legislative reforms aimed at facilitating cross-border voting have failed to remove this barrier, either directly by entitling the ultimate investor to vote or indirectly by imposing duties on financial intermediaries to enable the ultimate investor to vote, such as a duty to accept or pass on voting instructions. In this respect, the status quo has prevailed so far. In order to understand why this is the case, section 5.3 analyzed the legislative process, focusing on the possible influence of interest groups.

The findings can be summarized as follows. First, European policymakers' positions at the various stages of the legislative process often appear to have been based on public consultations or reports prepared by market practitioners. Two stages of the legislative process were preceded by such reports. In both instances, the European Commission, at least initially, adopted the positions taken in these reports, even though they essentially contradicted one another. Moreover, three stages of the legislative process were preceded by consultations. In two instances, the Commission's position echoed positions taken by respondents to those consultations.1 In another instance, the fact that the Commission refrained from launching any further initiatives on the issue of cross-border voting may (or may not) have been due to objections against legal reform raised by respondents to a preceding consultation.

Second, as one would expect, the conclusions emerging from such consultations and reports generally tend to reflect the interests of the groups of market practitioners that are relatively strongly represented among the authors of the reports or the respondents to the consultations.2 This becomes clear, for example, when we focus on financial intermediaries (who profit most from the status quo and can therefore be expected to oppose legal reform) and on institutional investors (who have the most to gain from legal reform). Institutional investors were relatively strongly represented in the Expert Group on Cross Border Voting in Europe, which advocated legal reform. Conversely, financial intermediaries were relatively strongly represented in the Legal Certainty Group, which opposed legal reform.

Third and finally, financial intermediaries appear to have had a particularly strong voice throughout the legislative process. At various stages of the process, the Commission's position echoed the position taken by financial intermediaries responding to consultations. More recently, the Commission's implicit choice not to propose the imposition of a duty on financial intermediaries to facilitate voting by ultimate investors appears to have been based on a report by the Legal Certainty Group, in which financial intermediaries were relatively strongly represented.

Together, these findings may go some way toward explaining why the status quo has prevailed so far.