Shareholders of European companies would win the right to vote on executive pay policies at least once every three years under a proposal to be submitted by European commissioner Michel Barnier, according to media reports.
The proposal would give shareholders the right to veto pay packages, oblige publicly listed companies in Europe to submit reports annually on their compensation policies and give shareholders the opportunity to express their concerns about the policies, according to Bloomberg News, which obtained a draft copy of the Barnier proposal.
‘There is currently an insufficient link between pay and performance of directors of listed companies,’ notes the draft copy, as reported by the news agency. ‘Shareholders often do not have sufficient tools to express their opinion’ on pay.
The draft copy also notes that company documents outlining pay policy should give ‘a clear indication of the minimum and maximum amounts that can be awarded’ and should state the ratio of variable pay to fixed pay, reports Bloomberg. It adds that national governments in the 28-nation European Union (EU) have uneven legislation offering shareholders the right to binding decisions on executive pay and suggests an EU-level rule is needed.
The European Voice reports that the proposal will also enforce stricter transparency rules on investors, obliging them to report on meetings with management of the companies they invest in and on attendance at votes. It would also require greater transparency from proxy advisory services such as ISS and Glass Lewis about how they reach their voting recommendations.
Barnier’s proposal follows a series of moves by the EU to cap annual bonuses for senior bankers at a maximum of twice the amount of their fixed pay, and to regulate pay for hedge fund managers and others in the financial services industry.
