16 Colum. J. Eur. L. 1 (2009)

Michael C. Schouten, Visiting Research Fellow, Columbia Law School; Teaching Fellow, Duisenberg School of Finance; Ph.D candidate, University of Amsterdam.

The important role of shareholder voting in the corporate governance of European public firms, coupled with the dramatic increase in cross-border share ownership, underscores the need for a system that facilitates cross-border voting. European policynakers recognize this, yet they seem reluctant to push through the reforms necessary to put such a system in place. As a result, the status quo has prevailed so far. To explain this paradox, this Article analyzes the legislative process surrounding recent European legislation aimed at facilitating cross-border voting. The analysis suggests that financial intermediaries, who generally have an interest in maintaining the status quo, have had a particularly strong voice throughout the legislative process by participating in expert groups and public consultations. This may go some way in explaining why the status quo has prevailed sofar. The policy implication of this analysis is that while the involvement of market practitioners in the legislative process certainly has benefits, policymakers should not rely on expert groups and public consultations to represent the interests of stakeholders in a proportional way, much less to devise optimal solutions. As far as cross-border voting is concerned, the European legislature will need to make its own independent judgment on how to increase social welfare, regardless of the outcome of a public consultation recently launched by the European Commission.