Control enhancing mechanisms (CEMs) are common in Europe and are not well perceived by investors. There is a variety of national practices regarding CEMs, but investor opinions converge regarding their non-desirability. This observation stems from a study on the proportionality between ownership and control in EU listed companies that was just handed in to the European Commission by ISS and its partners, Shearman & Sterling LLP and the European Corporate Governance Institute (ECGI).

Some facts in the Study, which are likely to get attention in the coming months are:

* Investors say they are not in favor of CEMs. This influences their investment decisions. 80% of investors expect a discount for companies with CEMs. For most investors, this discount should range between 10% and 30% of market price.

* While all countries allow CEMs from a legal point of view, not all companies use them as much. Of all the European sample analyzed, 56% of companies feature no CEM.

* The countries with the highest proportion of companies featuring at least one CEM are France, Sweden, Spain, Hungary and Belgium, which all have a majority of companies featuring CEMs.

* Recently listed companies have less CEMs than large companies. This means less occurrences of CEMs but also less combinations of CEMs

* The academic review shows that academic research on CEMs is non-conclusive at this date. Any action taken by the commission will have to weigh the expected benefits of regulating these mechanisms against the perceived costs of unexpected consequences.

For more information on the content of the Study, please visit here.