The Principle of Shareholder Primacy in Company Law from a Nordic and European Regulatory Perspective

Abstract

In the EU as well as in the US there is an ongoing debate of which role shareholders should play in companies. This debate includes both theoretical discussions on the nature of companies and practical discussions on the various situations where shareholder involvement is required. The role of shareholders in companies life is considerably different in the EU Member States and in the US.A shareholder-oriented approach prevails in the US and de facto also in the UK, while a more stakeholder-oriented view often is said to dominate in the Nordic countries as well as in Austria, Germany and the Netherlands. One of the main aims of the European Commission’s Action Plan is to strengthen the position of shareholders in the company. In order to ensure that the shareholders are able to play an active role in the company’s decision–making process, a growing number of measures have been adopted both at national and EU level which shall ensure an improvement of the corporate governance system. Moreover, several recommendations have been drafted by the Commission with the aim to improve transparency and shareholder influence.The terms characterizing this debate differ: In the Nordic countries the term ‘active ownership’ (‘aktivt ejerskab’) is often used; in the international debate terms like ‘shareholder activism’ and ‘shareholder democracy’ are used to refer to the discussion of the role of shareholders. Especially, but not only, in the American debate the term shareholder primacy is used. However, all these terms are merely headlines which should be filled out and codified by rules of (national) Companies Acts. The underlying message of active ownership is that the law should provide for easier access for shareholders to be active owners. Shareholder activism requires that constraints on shareholder control should be removed and that shareholders, namely institutional shareholders, should (be obliged to) use their voting rights and other means of influence. Shareholder democracy asks for an approach which gives shareholders the power to influence and to determine a company’s course of life. Consequently the different terms define, to a certain extent, a common basis for the role of shareholders. In short, this common basis implies that shareholders are the ultimate decision-takers of the company and define the company’s objective. This common basis is the fundamental content of the term shareholder primacy which is more closely examined in this article. The goal of this article is to define the principle in a Nordic and European perspective, however the focus is mainly on Nordic company law. The European principle may not necessarily be identical with the US concept.It is important to address the role of shareholders when drafting European company law provisions. In order to secure consistency in European regulation and work for European convergence in company law, it is in our view to seek for and to define a general principle on European shareholder primacy from a regulatory perspective.