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Gerben Everts ABP Investments

One-Share-One-Vote Experiences from the corporate control market A Pension Fund’s Perspective ECMI / CEPS 07 December 2006. Gerben Everts ABP Investments. Overview. Introducing ABP Institutional Investor Activism in the Netherlands in the EU / globally Support for EU initiatives

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Gerben Everts ABP Investments

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  1. One-Share-One-VoteExperiences from the corporate control marketA Pension Fund’s PerspectiveECMI / CEPS07 December 2006 Gerben Everts ABP Investments

  2. Overview • Introducing ABP • Institutional Investor Activism • in the Netherlands • in the EU / globally • Support for EU initiatives • Reimbursement of costs of activism? • Conclusion

  3. Introducing ABP • Pension fund of participants in service of the Dutch government and the educational sector • Approx. 2.6 million participants • Based on solidarity and not-for-profit • ABP invests close to € 203 billion • Nominal funding ratio close to 130% • Established in 1922, privatized in 1996 • The third largest pension fund in the world • 2,400 employees (Amsterdam, Heerlen • New York, Hong Kong)

  4. Introducing ABP

  5. Institutional Investor Activism in the NL (1) • Part of a global market for corporate control • Anti-takeover devices in the NL • Preference shares (58%, from 63% in 2001) • Priority shares (16%, from 34%) • Depository receipts (16%, from 20%) • Supermajority requirements (11%, from 20%) • Voting cap ( 0%, from 3%) • Golden share ( 0%, from 4%)

  6. Institutional Investor Activism in the NL (2) • Gradually, breakdown of anti-takeover devices • Main influences: • Corporate Governance Code (Tabaksblat) • Takeover Bids Directive (TOB) • Going concern vs Hostile bid • Room of manoeuvre for the Board • Restrictive implementation of TOB

  7. Activism in the EU and globally • An EU shareholder democracy is developing • Bridging different philosophies • Based on firm principles and flexibility • There is no ‘one size fits all’ • Shared scepticism on US shareholder model • Position of ABP: full voting list

  8. Support for EU initiatives • But we need to keep pace • No status quo • We need: • Proportionality between capital and votes • The breakthrough rule • Applying a step by step approach • Allowing an effective dialogue with shareholders • Possibly redefining the General Meeting of Shareholders

  9. Reimbursement of costs of activism? • Short-term thinking basis for current securities valuation • Economic forces that discourage institutional investors from being active • Counterbalance needed: • Registration dividend • Voting dividend • Loyalty dividend

  10. Conclusions (1) • We should remain ambitious • Although shareholder democracy might not be perfect • Any alternative is less attractive • Ultimate objective should be better functioning companies and economies • 1-s-1-v should be the starting point in all analyses • However, temporary deviations should be allowed • Stimuli might be considered to overcome market imperfections

  11. Conclusions (2) • The principles of an EU corporate governance ‘system’ should be: • One Share; • One Vote; and • One long-term perspective to be able to remain competitive and contribute to future growth and prosperity for an ageing population. • -o-

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