EC Unveils Results Of Corporate Governance Consultation

by Ulrika Lomas, for LawAndTax-News.com, Brussels

17 June 2004

The European Commission on Tuesday announced the results of its corporate governance consultation on directors' renumeration.

The consultation document was published on 23 February 2004, and proposed a set of measures primarily covering disclosure of remuneration policy and of individual remuneration, as well as shareholder approval of share-based remuneration schemes for directors.

In a statement released this week, the EC revealed that among the 101 responses received from 14 countries, there was widespread support for the Commission’s proposal to raise transparency in directors’ remuneration by disclosing remuneration policy for the next financial year and by unveiling the remuneration of individual directors in the preceding financial year.

Most respondents also reportedly agreed with the Commission’s plan to boost shareholders’ role in approving share-based remuneration schemes – for example share options - for directors. Concerns were, however, expressed over the Commission’s intention to invite Member States to implement the requirements of the future recommendation through regulatory measures.

Speaking earlier this week, Internal Market Commissioner Frits Bolkestein announced that:

“I welcome the results of this consultation which show the strength of the consensus on the approach proposed by the Commission. Directors’ remuneration is best addressed not through heavy-handed interference in the internal affairs of companies but by making sure shareholders are properly informed on how and how much directors of the companies they own are being paid and that they can make their voice heard to stop improper practices and ensure remuneration systems motivate directors to perform better and deliver long-term shareholder value."

"For now, gaps between Member States on transparency and shareholders’ rights are still quite wide. The Commission’s forthcoming Recommendation will aim to bridge those gaps and contribute to creating a truly pan-European securities market which inspires investor confidence.”

The EC plans to draft a recommendation on the creation of an appropriate regime for the renumeration of directors, taking into account the points raised during the consultation, for adoption this autumn.

Recommended