The Implementation of the Shareholders Rights Directive in Danish Company Law: Should Shareholders Say on Pay be Binding or Advisory?

Ida Kromann Eriksen

Student thesis: Master thesis


The purpose of this thesis is to determine the most optimal implementation of the shareholders rights directive 2017/828/EU in the Danish Company act regarding whether shareholders right to vote on the remuneration policy should be binding or advisory. This will be answered through a legal and economic analysis. First of all, the legal analysis examines the change in the decision-making between the general assembly and the Board of Directors regarding the remuneration of the management. According to the current Danish Companies Act, shareholders have the right to vote on the general assembly regarding the variable pay of the management. Furthermore, there exists recommendations in soft law, which states that the general assembly also votes regarding the fixed pay. These recommendations are in general in accordance with the new art. 9a and 9b, which imply that the main difference is that these soft law recommendations becomes hard law. A binding vote in accordance to art. 9a, paragraph 2 will influence on a higher level on the current decision-making in Danish company law, whereas an advisory vote according to art. 9a, paragraph 3 will maintain most of the decision-making to the Board of directors. In an economic perspective, more specifically a game theoretical perspective, it is shown how the different votes gives different incentives to the management and the shareholders. It is concluded that the binding vote gives more incentives for the shareholders to provide active ownership and for the director to focus on the long-term value in the company. The final chapter gathers the conclusions from the legal and economic analysis. First, the different outcomes of the games are pointed out in an efficiency analysis. In extension to this, the different conclusions will be analyzed to state which kind of voting most effectively will aim the purpose of the directive. The thesis concludes that the most optimal implementation will be a binding vote, and the thesis therefore supports the final implementation in the Danish Company Act, which was stated the 4th of April 2019.

EducationsMSc in Commercial Law, (Graduate Programme) Final Thesis
Publication date2019
Number of pages85
SupervisorsSøren Friis Hansen & Caspar Rose