Director–Shareholder Dialogues Behind the Scenes: Searching for a Balance Between Freedom of Expression and Market Fairness

The freedom of speech of European issuers’ directors is subject to severe restrictions. This article aims to cast light on the behind-the-scenes dialogues that occur between shareholders and directors, and on the boundaries that directors cannot cross when selectively speaking to shareholders outside of general meetings. The article proposes considerations that may apply to a broad range of cases. Not only may boards of directors need to involve their main shareholders in decision-making processes, but boards may also face institutional investors’ requests to arrange specific discussions on company matters. Such engagement aligns with the latest trend in corporate governance that calls for the increasing involvement of institutional investors in ongoing dialogue with the board, thus placing directors in a delicate position under the influence of management and of the voice of shareholders. The result is a framework in which behind-the-scenes dialogues are not governed by the principle of shareholder democracy, while rules governing shareholders’ meetings are. The board of directors may organise private meetings with the most influential or ‘vocal’ shareholders (as market sounding procedures clearly envisage), in which only some shareholders are invited to participate, without violating the principle of equal treatment. However, the article points out that (i) strict limitations on transmittable content in these situations derive from the European Market Abuse Regulation, and (ii) the principle of equal access to information, convincingly adopted in the European system, significantly affects the conduct of selective dialogues with shareholders. When directors speak to shareholders, engaging in selective or improper disclosure might be just around the corner.