Behavioural Economics in European Corporate Governance – Much Ado about Nudging?

Abstract

Shareholder engagement from institutional investors remains a topic on the agenda of both legislators and in the public debate. The recent amendment of the SRD can be seen as a token of a pan-European ‘hardening of shareholder norms’. The arising question is if this hardening is sufficient to change the behaviour of institutional investors. Using insights from behavioural economics, the article discusses if the European Union and national Member States can apply nudging or other insights from behavioural economics to increase shareholder engagement and argues that in order to follow a behaviourally informed strategy, a distinct justification of both the applied means and the pursued purposes is required. Corporate governance, European Union, shareholder engagement, active ownership, institutional investors, behavioural economics, choice architecture, nudging, biases, libertarian paternalism