DISCLOSURE: concerns about 'control-enhancing mechanisms'


Corporate lawyers have warned the European Commission to tread carefully when considering its policy on the controversial issue of 'one share, one vote.'



The commission has been urged by investor groups to require greater disclosure and transparency from companies with regard to so-called control-enhancing mechanisms, which enable companies to treat shareholders unequally, for instance by putting a ceiling on voting rights or giving multiple rights to certain shares.



Critics claim these can entrench inefficient management teams or prevent a company being taken over.



The commission published a report last month which found no conclusive link between a company deviating from the 'one share, one vote' principle and its economic performance or governance. However, it suggested the need for greater transparency from listed companies. The Law Society's Brussels office last week organised a roundtable discussion in London to discuss it.



Lucy Fergusson, partner at Linklaters, said: 'This is a subject that needs to be approached with delicacy. The commission needs to focus on the lightest possible touch and encourage a market-based approach.'



Freshfields partner Vanessa Knapp agreed. 'One share, one vote sounds like a good idea, but in reality the issues are more complicated,' she said. 'I'm a believer in allowing markets to fix problems as far as they can.'



Peter Montagnon, director of investment affairs at the Association of British Insurers, said: 'We don't really know what the effect of these devices is. If there was a regime that encouraged greater transparency, it would give us a greater understanding of what they do and what benefits they bring.'



Catherine Baksi