Thursday

29th Feb 2024

EU commission calls for shareholder powers on corporate pay

  • "I cannot explain this enormous gap between the level of pay and corporate governance," says internal market commissioner Michel Barnier (Photo: snorski)

Company shareholders would have a legally binding 'say on pay' under a new proposal by the European Commission published Wednesday (9 April).

The reform, which forms part of a re-write of the bloc's corporate governance law would cover the 10,000 European companies listed on the bloc's stock markets.

Read and decide

Join EUobserver today

Get the EU news that really matters

Instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

Internal market commissioner Michel Barnier said that the measures would "encourage shareholders to engage more with the companies they invest in, and to take a longer-term perspective of their investment".

"To do that, they need to have the rights to exercise proper control over management, including with a binding 'say on pay'."

Under the regime, companies would have to put their remuneration policy to a legally binding shareholder vote. The policy would need to include a maximum level for executive pay and explain the ratio between average wage levels of employees and executive pay. It would also need to be tied to the long-term interests and sustainability of the company.

"There is an insufficient link between management pay and performance and this encourages harmful short-term tendencies," says the commission.

Although the proposal does not include a cap on executive pay, unlike the EU's rules for the banking sector, it is the latest EU attempt to link pay to the long-term performance of a company and to tackle the corporate bonus culture.

Bank bonus rules adopted in spring 2013, as part of a law aimed at increasing the amount of capital banks must hold on their books, say that executives can receive up to double their salary in bonuses if a majority of shareholders agree.

EU lawmakers have also adopted pay caps for hedge fund and investment managers.

"I cannot explain this enormous gap between the level of pay and corporate governance, and it does leave you with a pretty bitter taste in your mouth when you see the excessive levels of pay in some cases," said Barnier.

John Davies of the Association of Chartered Certified Accountants welcomed the plan as "a step forward towards increasing transparency as regards shareholder identification and shareholder oversight".

"The proposed 'say on pay' will give shareholders a new right to influence and approve their company's remuneration policy. It is important to encourage shareholder commitment that is in line with long-term company interests and ensures better operating conditions for listed companies," he added.

However, with the European Parliament holding its last plenary session next week before going into recess ahead of May's European elections, negotiations on the bill will not start until September.

Meanwhile, the commission also unveiled plans to harmonise EU rules on the creation of small businesses to make it easier for them operate across the 28-country bloc.

EU seeks more corporate transparency

A new EU bill calls on companies to publish information ranging from anti-corruption and bribery measures to their boardroom policies and employment practices.

EU supply chain law fails, with 14 states failing to back it

Member states failed on Wednesday to agree to the EU's long-awaited Corporate Sustainable Due Diligence Directive, after 13 EU ambassadors declared abstention and one, Sweden, expressed opposition (there was no formal vote), EUobserver has learned.

Angry farmers block Brussels again, urge fix to 'unfair' prices

Following weeks of demonstrations across Europe, farmers returned to Brussels to protest over unfair competition in prices, as EU agriculture ministers met just a few metres away to discuss a response. The police used water cannon and tear gas.

Latest News

  1. Podcast: Hyperlocal meets supranational
  2. Von der Leyen appeals for 'new EU defence mindset'
  3. EU supply chain law fails, with 14 states failing to back it
  4. Joined-up EU defence procurement on the horizon?
  5. Macron on Western boots in Ukraine: What he really meant
  6. Amazon lobbyists banned from EU Parliament
  7. MEPs adopt new transparency rules for political ads
  8. EU nature restoration law approved after massive backlash

Stakeholders' Highlights

  1. Nordic Council of MinistersJoin the Nordic Food Systems Takeover at COP28
  2. Nordic Council of MinistersHow women and men are affected differently by climate policy
  3. Nordic Council of MinistersArtist Jessie Kleemann at Nordic pavilion during UN climate summit COP28
  4. Nordic Council of MinistersCOP28: Gathering Nordic and global experts to put food and health on the agenda
  5. Friedrich Naumann FoundationPoems of Liberty – Call for Submission “Human Rights in Inhume War”: 250€ honorary fee for selected poems
  6. World BankWorld Bank report: How to create a future where the rewards of technology benefit all levels of society?

Join EUobserver

EU news that matters

Join us