On December, 9th 2016, the European Parliament published an
informal agreement reached by European Parliament, Council and
Commission negotiators on shareholders' right to vote on
directors' pay. This new directive will aim at ensuring full
transparency for listed companies and investors, as well as linking
directors' pay to company's long term performances.
What does it mean?
The so-called "say on pay" will give shareholders the
right to take part in the decision process for directors' pay
through the vote on remuneration policy for company directors.
This new approach will ensure a stronger control over the
directors' pay levels by linking it to their performance but
also to the company's long-term interests.
In order to increase the transparency of directors' pay, the
remuneration policy will have to explain:
to what extent it takes into account
the employees' pay and employment conditions;
how it contributes to the
company's interests in a long-term perspective.
Besides, "dangerous" transactions will have to be
disclosed and approved to minimize risks and ensure the protection
of both the companies' and shareholders' interests.
Finally, the directive will entitle the companies to identify
their shareholders. This measure has been designed to ease
communication and thus ensure a stronger involvement of
The European Parliament, Council and Commissions agreed on the
rules mentioned above but they will be formally approved in January
2017 by a vote of the Legal Affairs Committee and by a final
plenary vote in March 2017.
In the context of the Parliament's focus on
shareholders' rights, a new directive on public
country-by-country reporting by multinationals on tax matters has
been proposed recently and should also be approved soon.
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