Hastings Business Law Journal


Institutional ownership of listed companies has grown significantly, leading to an increase in ownership concentration in the European Union. Under the current context of re-concentrated ownership, institutional shareholders are expected, also in Europe, to play a more active role in corporate governance and to exert influence on the company’s strategies. Within such a corporate governance landscape institutional investor engagement is becoming a distinctive feature of corporate governance of European listed companies. In particular, board-shareholder dialogue is a key engagement tool and is essential in order to enable institutional investors to fulfil their stewardship functions. Board-shareholder dialogue is also core to listed companies’ communication strategies, since the growing demand for engagement by institutional investors has rendered traditional investor relations insufficient. Nevertheless, private meetings between directors and institutional investors raise concerns with respect to the financial markets law framework in the EU. In particular, the EU market abuse regime and the related principle of equal treatment for shareholders seem to hinder dialogue between directors and key shareholders. Against this background this Article shows that legal constraints deriving from EU financial markets law do not hamper institutional investor engagement. Furthermore, based on recommendations from corporate governance and stewardship codes as well as good practice standards drafted by corporate governance experts and institutions, it outlines an innovative practical framework that reduces the risk of violating disclosure rules and fosters board-shareholder engagement. In doing so, the Article provides theoretical and practical insights that can help to make institutional investor engagement more effective also in non-European countries.