In the European Union, numerous mechanisms exist that allow limited numbers of shareholders to exercise significant influence on companies disproportionate to their financial contribution to the wealth of the company. For this reason, the European Commission has decided to take a closer look at the question of proportionality and capital in companies listed in the EU.

Those that advocate a move away from control-enhancing mechanisms and towards 'one-share-one-vote' being the norm, acknowledge that although there may be implementation challenges, these would be outweighed by the creation of a true single EU marketplace in which all shareholders could exercise their rights in a democratic manner.

Detractors point out that control-enhancing mechanisms in the EU are created by shareholders at the general meeting and are acquired voluntarily and knowingly by investors. They argue that many EU countries have applied the system of multiple voting shares, for instance, for over 100 years and have no knowledge of any difficulties or complaints.

The situation in the US is very different with 92% of market capitalization including companies that have voluntarily chosen to align cash flow and control rights. This is a high number compared to the EU.

ISS has been selected to lead an important research project, in collaboration with the global law firm Shearman and Sterling LLP and the European Corporate Governance Institute (ECGI), on the proportionality between ownership and control for the European Commission. This EC research initiative will tackle the important corporate governance concept of "one share-one vote" and lead to more insightful discussion within the industry.

Led by Managing Director of ISS Europe, Jean-Nicolas Caprasse, ISS' team of European researchers working from our Brussels, London, Paris and Amsterdam offices will produce profiles on the structure of over 450 companies in 16 EU member states. ISS has also been asked by the EC to survey institutional investors in European and international markets about their views on control-enhancing mechanisms.

The final report will include an overview of European regulatory frameworks by Shearman and Sterling plus a review of existing theoretical and empirical research by ECGI. Both the overview and review will contain a comparison of the situation in some key jurisdictions outside the European Union. To view the full announcement, please click here.

What are your thoughts on the one share-one vote principle? We welcome your thoughts.