Brussels aims to reward investor loyalty Loyal shareholders in European companies would gain extra voting rights and a bigger slice of dividends under a proposal being floated by Brussels to spur long-term investment. Michel Barnier, the EU single market commissioner, is preparing to field views on potentially revising the "one-share one-vote" principle applied by the bulk of EU companies, according to drafts of the plan seen by the Financial Times. Rewards for shareholder commitment, some of which are already prevalent in France, would be designed to discourage destructive short-term speculation and stabilise conditions for companies and markets. But any move to overhaul shareholder rules would prove highly contentious, particularly in the UK and Germany, where it is likely to prompt complaints about undermining investor rights and giving an unfair advantage to vested interests. The ideas are one element of a consultation paper on how to promote sustainable financing for the real economy, which is to be released within weeks by Mr Barnier. While no date is set for legislative proposals, the paper gives an indication of Brussels" medium-term agenda. Given the controversy around any attempt to change the EU's diverse patchwork of shareholder rights, there is still likely to be a debate in the commission over whether the idea should appear in the final paper. Other options include consideration of whether "particular types of long-term investments merit preferential capital requirements," specifically for insurance groups. The paper calls for debate on the favourable tax treatment given to debt over equity and whether "the use of fair value [accounting] has led to short-termism in investor behaviour." With regard to shareholder rights, the draft proposes further work on "analysing the possibility of options around granting multiple voting rights to long-term investors" - forms of which are prevalent in France, Sweden and the Netherlands. In France, Mr Barnier's home country, it is common for companies to grant double voting rights to ordinary shareholders who have registered for at least two years. The draft paper in addition advocates "considering the possibility of options around linking dividend payments to the holding period of shares as a way of creating additional incentives for longer-term shareholder engagement and value." Supporters argue the reforms give incentives for long-term investors and discourage speculative runs on companies. But opponents say unequal voting rights merely serve to coset management from the discipline of market pressure. Voting caps and extra voting rights for long-term shareholders can also make it easier for strategic shareholders to tighten their grip on the company and discourage takeovers. The consultation paper does reflect a distinct shift in commission thinking since the economic crisis. The previous single market commissioner, by contrast, attempted to make shareholder votes "more democratic" with a "one share one vote" reform. However, this was dropped after fierce resistance from France and Sweden. An independent study for the commission found that, in practice, there was no causal link between a company's financial performance and the rights it gave shareholders.