EU May Mandate CorpGov Measures

A “say on pay” could be introduced across Europe, along with potential quotas for the number of women in boardrooms, as a result of proposals outlined by the European commission.

British companies have been required to put their remuneration policies to a shareholder vote since 2003 when pharmaceutical company GlaxoSmithKline became the first company to have its pay plan opposed by its investors.

Europe is now asking whether companies across the 27 member states should be forced to put their remuneration policies to a vote by shareholders – and indeed even make disclosure on pay mandatory for both executive and individual directors for the first time in some countries.

The green paper said: “A mismatch between performance and executive directors’ remuneration has also come to light.”

(EC proposes ‘say on pay’ and quotas for women in the boardroom | Business | The Guardian., )
Responses to 25 questions outlined in a green paper are due by July, the commission asked whether companies should be required to “ensure a better gender balance on boards” than the current 12% across the EU.

I found several of the 25 questions equally interesting, including the following:

  • Should the EU seek to ensure that the functions and duties of the chairperson of the board of directors and the chief executive officer are clearly divided?
  • Should recruitment policies be more specific about the profile of directors, including the chairman, to ensure that they have the right skills and that the board is suitably diverse? If so, how could that be best achieved and at what level of governance, i.e. at national, EU or international level?
  • Please point to any existing EU legal rules which, in your view, may contribute to inappropriate short-termism among investors and suggest how these rules could be changed to prevent such behaviour.
  • Are there measures to be taken, and if  so, which ones, as regards the incentive structures for and performance evaluation of asset managers managing long-term institutional investors’ portfolios?
  • Should EU rules require a  certain independence of the asset managers’ governing body, for example from its parent company, or are other (legislative) measures needed to enhance disclosure and management of conflicts of interest?
  • Are there measures to be taken, and is so, which ones, to promote at EU level employee share ownership?

Interested parties are invited to submit their views on the suggestions set out in the
Green Paper. Contributions should be sent to the following address to reach the Commission by 22 July 2011 at the latest: Contributions will be published on the internet.

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