Directors’ pay – Commission sets out guidance on disclosure and shareholder control
European Commission - IP/04/1183 06/10/2004
Brussels, 6th October 2004
The European Commission has adopted a Recommendation on directors’ remuneration. It recommends that Member States should ensure listed companies disclose their policy on directors’ remuneration and tell shareholders how much individual directors are earning and in what form, and ensure shareholders are given adequate control over these matters and over share-based remuneration schemes? The Commission has also adopted a Recommendation on the role of independent directors (see IP/04/1182).
Internal Market Commissioner Frits Bolkestein said: “There is a conflict of interest when executive directors take part in setting their own pay. Shareholders should be better informed - they are the company, not the management. They must make sure remuneration policy gives enough incentive to directors and is right for the company. Member States should ensure that companies get remuneration policy right and are seen to do so by investors. Proper disclosure and giving shareholders effective control are essential to restore confidence in EU companies and securities markets. But we are not interfering in companies’ internal affairs or individual decisions on remuneration. This is about providing guidance to Member States in ensuring that shareholders know what is going on and can get things changed if they do not like them.”
The non- binding Recommendation invites Member States to adopt measures in four areas:
The Recommendation takes due account of efforts already made by several Member States and aims to foster these developments by identifying best practices to ensure greater convergence in the EU. The Commission will closely monitor the application of the Recommendation to identify whether additional measures may be desirable in the medium term.
The full text of the Recommendation is at: