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The "comply or explain" principle has already acquired significant importance in corporate law and regulations and is considered to be the preferred regulatory tool in the EU for increasing transparency and disclosure of market participants' strategies and activities. The flexibility of the principle is perceived as the most suitable way to create indirect coordination of practices amongst market actors, as well as better mutual understanding of their different priorities. Having initially shown its considerable appeal in the area of corporate governance statements issued by corporate entities, it has now expanded its influence into other areas serving similar transparency imperatives, such as the exercise of stewardship responsibilities by institutional investors and proxy advisors. In this paper, we will focus on the merits and shortfalls of the "comply or explain" principle in all the above-mentioned areas, both at national and at EU levels, and will critically challenge its effectiveness in the current regulatory framework. Moreover, we will seek to justify its continued use by demonstrating its future potential role as a veritable dialogue spectrum between different market participants. Lastly, we will emphasise the need for a soft monitoring process from national regulators which will enable both the "comply or explain" principle and its users to participate in a holistic effort for the adoption of sound investment strategies via the fruitful exchange of views and ideas and better communication with regard to their respective role in capital markets.

European company and financial law and regulation have been evolving over time along with business and financial practices. The resulting ‘social licence’ established by company and financial law and regulation aimed to balance the granted privileges of limited liability and share transferability with the corporate social contribution to economic development and employment. Recent transformations driven by shareholder value and financialisation have been challenging this balance of interests between stakeholders (including employees and shareholders) and society. The EU institutional framework may respond to these challenges by reaffirming the centrality of the enterprise as a going concern. On this basis, corporate accountability and responsibility may be enforced to make ongoing corporate affairs accountable and responsible for their contribution to economy and society. Ongoing corporate capacity to cope with social and environmental responsibilities may be assured along with the fair and sustainable remuneration of stakeholders, including shareholding investors, and a fair tax contribution. The EU institutional design and policy mix may be organised to respond to this comprehensive set of corporate dimensions. Here the most relevant fields to be reconsidered include: enterprise groups and corporate social responsibility; financial reporting and transparency; financial investment and asset management.

Purpose of the paper: Recent research identifies a troubling number of institutional investors that automatically follow the advice of their proxy advisors so that they can prove to have complied with their fiduciary duties in a practice known as robo-voting. Therefore, our central research questions are: How could the characteristics of institutional investors affect robo-voting phenomenon? How could robo-voting phenomenon favour the creation of new opportunistic behaviour, changing the scope of shareholder engagement? Methodology: Our paper directly addresses these questions by using ANCOVA (Analysis of Covariance) to test the effect of characteristics of institutional investors on the dependent variable under study. We use a manually constructed sample of coverage information from 123 Annual General Meetings held by large Italian companies in the 4-year period 2015 to 2018 and the voting reports of three proxy advisors. Findings: We show that such voting based on robo-voting phenomenon is restricted to specific types of institutional investors and it may be highlighted as a negative aspect of a duty to ‘demonstrate’ engagement on the part of institutional investors. Specifically, this duty could depend on location, strategy and category of institutional investors. Research limits: We refer only to the Italian market and it may be considered as a peripheral market by investors. Practical implications: We argue that legal enforcement of the conceptual and operational spectrum of engagement duties currently sits uncomfortably upon institutional investors and proxy advisors. Originality of the paper: We think it is important to consider how to promote shareholder engagement in general in a European context and at the same time curb negative activism by some shareholders.

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