It was one of the root causes of the financial crisis, contributed to the collapse of RBS - Scotland's largest ever company failure - led to a management crisis at Tesco last year and more recently was at the centre of an acrimonious stand-off between Dundee-based Alliance Trust, one of the UK's largest investment houses, and the US hedge fund Elliott Partners.

That dispute pitted the interests of small independent and local shareholders - typically characterised as widows, teachers, nurses whose shares had been held by their families for generations - against those of short-term institutional investors.

Now the European Union is planning to improve corporate governance throughout the 28-member bloc by bringing in controversial new laws which aim to stamp out what is widely seen in continental Europe as one of the worst features of the Anglo-Saxon capitalist model: poor corporate decision-making driven by the pressure to maximise short-term profits for shareholders. So, in future, Alliance Trust's "ordinary people" investors may be relatively more empowered and have fewer rearguard actions to fight.

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As far as the UK is concerned the most far-reaching part of the Shareholder Rights Directive - which is expected to be voted through the European Parliament on Wednesday - is a requirement that would give long-term shareholders more say in the running of a company than short-term stakeholders by being rewarded with additional voting rights, enhanced dividends or tax incentives.

But the proposal - which has yet to be approved by member states - is already facing strong opposition and a lobbying backlash in this country.

David Watt of the Institute of Directors Scotland - who cites the UK's bailed out banks and Rangers Football Club as "high profile examples of where corporate governance has gone wrong" - said the EU's over-complex proposals smacked of undue political interference in private sector companies.

"Perhaps politicians should focus on what they can do like producing tax regulations which ensure that companies pay their fair share," he said.

"We support shareholder input and control over remuneration but are far from convinced that these proposed steps actually help."

CBI Scotland Director Hugh Aitken, meanwhile, said it was important that the directive should not impinge upon best practice already being carried out at a national level.

"Significant differences in listing regimes and company law across different EU countries indicate that individual member states are better placed to develop the right tools to encourage long-termism in their equity markets," he said.

Scottish Conservative MEP Ian Duncan MEP told the Sunday Herald that, while he supported the aim of improving the long-term sustainability of companies, the measures to be voted on in Strasbourg next week would introduce unnecessary and burdensome obligations on companies and shareholders.

The European Commission counters that the new laws will improve the corporate governance of the EU's 10,000 companies listed companies and could help stop any repeat of the financial crisis which was, in its view, at least partially precipitated by the damage to companies caused by short-term decision-making.

Proponents of long-term investing frequently point to the £49 billion purchase - dubbed the worst corporate takeover ever - by RBS of Dutch bank ABN-AMRO at the peak of the stock market in 2007. A year later, RBS needed a £45.5bn taxpayer bailout which left the UK government with an 81 per cent stake.

Another controversial measure in the Shareholder Rights Directive designed to improve tax transparency would make multinationals publicly report their pre and post tax profits in every country, a measure that could make it harder for companies to squirrel away cash in low tax regimes.

The so-called "country by county" financial reporting requirement (currently a requirement only for banks and mining companies) would force companies to break down their financial information in each country in which they operate instead of - as is currently standard practice - publishing global or regional figures.

SNP MEP Alyn Smith says he is sceptical about whether creating special classes of shareholders for public companies - as required by the EU directive - is the best way of encouraging long-term corporate decision-making.

That objective could better be reached through fiscal incentives, he says. Nevertheless, the requirements to increase financial reporting transparency could help reduce corporate failures in the future, pointing to the demise of RBS which Smith describes as "a failure of management oversight, shareholder oversight and regulatory oversight".

The push to give long-term shareholders greater power comes as evidence from France - where double voting rights for long-term investors have been the law for years - shows that investors have been using the powers to entrench company boards and disenfranchise minority shareholders.

Earlier this year Proxinvest, a French proxy voting agency, said that 32 board resolutions that would have been rejected by investors at annual general meetings last year on the basis of "one share, one vote" were carried because of double-voting rights. Many of the resolutions were to do with remuneration, such as the granting of free shares to executives.

For Mike Everett of Edinburgh-based Standard Life Investments, one of the UK's largest asset managers, many of the provisions in the Shareholder Rights Directive (such as allowing shareholders to vote on remuneration) will simply bring the rest of Europe into line with UK company law.

However Everett believes that any move away from the principal of "one share, one vote" is a cause for concern.

In March Standard Life Investments - along with other global investors and asset owners - signed a collective letter complaining of a new law in Italy that permits the award of "loyalty shares" to shareholders who have continuously held their shares on a special register for two years or more.

Everett believes that this will lead to the dilution of minority shareholders who are long-term institutional investors in Italian listed companies, including his own company Standard Life Investments.

The UK's investment industry, meanwhile, is unhappy that the EU proposals will force institutional investors to publicly disclose how they pay asset managers. Pension funds would also be expected to explain how they evaluate a fund manager's performance.

The requirements have been questioned by Liz Murrall of the UK's Investment Association, which represent UK fund managers, who said it was not clear what the public interest was in requiring such information to be made public.

Scottish Labour MEP Catherine Stihler has misgiving about moving away from the principle of equal rights for all shareholders saying that "it could disenfranchise minority shareholder and thereby undermine the corporate governance the proposal is seeking to improve". Nevertheless, she believes that encouraging long-term corporate decision-making is ultimately good not only for companies but also for shareholders.

Stihler also welcomes the EU directive's requirements on greater tax transparency which, she says, will help clamp down on cross-border tax evasion by multinationals and could have stopped the tax evasion schemes running into billions of pounds that were recently revealed to have been approved by the Luxembourg tax authorities.

In addition to the measures to encourage long-term management of companies, the Commission also aims to align executive salaries and bonuses more closely to longer-term performance but a key requirement of the directive - making companies subject to a binding shareholder vote on executive pay, giving investors a "say on pay" - was implemented in the UK in 2013 at the instigation of former business secretary Vince Cable.

Other signs that the UK is ahead of the curve compared to many other EU members when it comes to reforming corporate governance include the 2010 launch of the Financial Reporting Council's Stewardship Code, the gradual implementation of the 2012 John Kay Review of UK Equity Markets and Long-Term Decision Making (one of whose key recommendations was a call to end quarterly company reporting in an attempt to move the focus away from short-term corporate performance) and the creation last year of an Investor Forum, which aims to make the case for long-term investment approaches by improving communication between shareholders and companies.

But for financial journalist Ian Fraser - a Sunday Herald contributor whose book Shredded, detailing the RBS scandal, was long-listed for the FT Financial Book of the Year Award - "the British model of corporate governance is broken and needs a rethink".

The new directive's push for institutional investors (who hold around a quarter of all shares in Europe), asset managers and proxy agents (who advise shareholders how to vote in shareholder meetings) to be more transparent in their dealings is welcomed by Fraser who says that anything that sheds light on the way that end-investors (individuals with pensions, mutual fund investments) in the UK are often "taken for a ride" by the system would be a step forward.

Lack of transparency over the management charges and transaction costs imposed by financial institutions in the UK is, he says, one of the reasons why asset management charges on pension funds in the UK typically amount to 1-1.5 per cent a year compared with just 0.55 per cent in the Netherlands. "Over decades of paying into a pension pot, that makes an enormous difference to the final size of the fund," says Fraser.

Fraser also said he hoped that the combination of UK and EU regulation and legislation would eventually help rein in the "the gravity-defying remuneration" of many UK business leaders, which he said is entrenching inequality.

Ahead of the annual general meeting of advertising giant WPP on Tuesday investors are being urged to vote against chief executive Martin Sorrell's pay award of £43 million for 2014.

Pensions and Investment Research Consultants (PIRC) - which points out that Sorrell is paid 37 times his base salary of £1.15m and 179 times more than the average employee at the company making him the highest paid boss of a British public company - have urged investors to vote against WPP's remuneration report.

According to Fraser, the collapse of RBS was a failure of corporate governance and regulation aided and abetted by "short termist and delusional" institutional investors.

"Auditors, ratings agencies, institutional investors and regulators all failed to spot that the Emperor was wearing no clothes," he said. "Investors were driving the bank to leverage up its balance sheet and to carry as little capital as possible in order in order to enhance short-term returns. Investors were lulled into a false sense of security by the seeming success of the bank."

Although there are some honourable exceptions in the UK financial world (Edinburgh-based investment houses Baillie Gifford and Walter Scott & Partners who are both known for their long-term "buy and hold" investment approach) average time a share is held by UK and US institutional investors is less than seven months today compared to seven years 50 years ago.

At the extreme end of the spectrum, high frequency traders and some hedge funds sometimes hold shares for no longer than twenty seconds: a form of "portfolio churning" that the Bank of England's chief economist Andy Haldane has criticised for adding transaction costs - borne by end-savers in the form of management fees - that mean that, on average, actively managed portfolios underperform "passive, sit-on-you-hands strategies".

It is all a far cry from Germany's approach to investment and corporate governance where the country's envied Mittelstand of small to medium sized export-oriented companies famously invest for the long-term and is held up by economists as a preferable way of doing business than that of most listed companies which face intense quarterly and annual pressure to meet analyst and shareholder expectations.

The aftermath of the financial crisis gave birth, in 2011, to the Occupy protest movement sit-ins in Wall Street and the City of London, which called for fundamental reform of corporate governance.

This was followed, in 2012, with the "shareholder spring" which saw shareholder activists in the UK rise up against corporate greed and traditionally back-seat investors flexed their muscles to the extent that several chief executives of top companies were booted out of office.

Some of that idealism has, since then, died down and the Occupy movement has largely withered away. However, if those protests helped spur on the legislative reforms now in the pipeline that will improve corporate governance, boost investment and help deliver future growth then it will have been worth it.