Eurocadres statement on the European Commission’s proposal regarding executive remuneration policies in listed companies
On the proposed revision of the Shareholder Rights Directive (2007/36/EC)
Eurocadres considers that working has to be a lucrative option, but on the other side, excessive differences in salaries do not belong to the social market economy, which is the core idea of the European Union. Against this background, the opinion of Eurocadres regarding the Commission proposal on executive remuneration in listed companies is the following:
- Eurocadres is in favour of the Commission's proposal on putting remuneration policies to a vote at an annual general meeting.
- Eurocadres is of the opinion that, during consideration of the executive remuneration system, the remuneration of the entire personnel should also be presented to the annual general meeting.
- Eurocadres considers it important that a report be made to the annual general meeting on the functioning and efficiency of remuneration policies. Remuneration linked to the company's result, executive commitment and employee job satisfaction, equality between men and women and wellbeing should also form the subject matter of such a report.
- Eurocadres is of the opinion that annual general meetings should be provided with a separate report on executive remuneration policies in cases where the company is making redundancies on financial and production-related grounds, or has tax liabilities. In such cases, the annual general meeting should assess the level and scope of remuneration policies in relation to the redundancies being made.
- Eurocadres thinks that European Works Councils should play a prominent role in assessing a report on executive remuneration. Councils should have the right to issue on opinion on reports in question. In addition, reports have to be public and be available, for instance, on the homepage of the companies.
On 9 April, 2014, the European Commission issued a proposal on certain measures aimed at improving the corporate governance of companies listed on Europe's stock exchanges (proposal to revise the existing Shareholder Rights Directive 2007/36/EC). According to the European Commission, the proposed measures would apply to around 10,000 companies. The proposal covers items such as the following:
- Shareholders would be given the right to vote on the company's remuneration policy.
- Companies would be obliged to disclose clear, comparable and comprehensive information on their remuneration policies and the implementation of such policies.
- No binding cap would be placed on remuneration at EU level, but each company would have to put its remuneration policy to a binding shareholder vote.
- This policy would need to include a maximum level for executive pay.
- It would also need to explain how the policy contributes to the long-term interests and sustainability of the company.
- In addition, it would need to explain how the pay and employment conditions of the company's employees were taken into account when setting the policy, along with an explanation of the ratio between average executive and employee pay. According to the proposal, a decision on the remuneration policy would be made every three years and should be published on e.g. the company's website. A remuneration report would be presented to the annual general meeting each year. The justifications provided for the proposal include the observation that the link between management pay and performance is insufficient and that this encourages excessive short-term risk taking.