Directors Remuneration And Golden Parachutes.Ppt
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Directors Remuneration and Golden Parachutes: a State of Play David Ryckaert, Advocaat-Avocat Simont Braun Louizalaan 149/20 Avenue Louise Brussel 1050 Bruxelles www.simontbraun.eu March 29th, 2010
description
A summary of recent developments in Belgium with regard to the remuneration of directors in listed companies and government owned companies, and a summary of the CBFA\'s circular on remuneration of important persons within financial institutions.Client seminar presentation of 29 March 2010
Transcript of Directors Remuneration And Golden Parachutes.Ppt
Directors Remuneration and GoldenParachutes:
a State of Play
David Ryckaert,Advocaat-Avocat Simont BraunLouizalaan 149/20 Avenue LouiseBrussel 1050 Bruxelleswww.simontbraun.eu March 29th, 2010
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Background
• Financial crisis• Banks in distress
→ Ethical and social view on managementremuneration
→ Setting management remuneration is not theresult of sole economic factors
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• G20: Framework for Strong Sustainable and BalancedGrowth – Financial Stability Board
• European Corporate Governance Forum
• US
International reactions (1)
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International reactions (2)
→ Main ideas:- Role of listed companies & systemic organisations- Transparency- Variable pay
performance related and deferral Clawback Stock options
- Severance pay: 2 years maximum None if poor performance
- Recommendations
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Our neighbors: recommendations onparachutes
• UK combined code 06/08• 1 year (?)• Germany : corporate governance code 06/08• 2 years (total compensation past year)• France : MEDEF recommendation 10/08• 2 years (basic + variable)• Dutch corporate governance code 12/08• 1 year basic (exceptionally 2 years)
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Belgium: evolution
• Labour agreements act (art. 82, §5)• « Corporate governance act » (2002)• Code Lippens (2004)
o = Corporate Governance Code (2009), except forparachutes
• Code Buysse (2005)o = Code Buysse II (2009)
• Audit committee act (2008)• (?) « Corporate governance act 2010 »
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Belgium: corporate governance code(°2004, updated 2009)
Scope : listed companies Recommendation : comply or explain
Sanctions :- Market perception- Liability
Remuneration committee : principle 5 Reason: compensation management & board
members→ Board of directors=> Conflict of interests
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Belgium: remuneration committee
Non-executive directors (only)Independent directors (majority)HOWEVER : non compliance : explain : nominations
Remuneration policy
Individual remuneration including a « parachute »
• Composition:
• Powers:
- Main conditions (including pension and parachute)- Elements and pondering- Basic en variable
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Belgium: parachutes
• Parachutes12 months basic + variable
18 months in certain cases only
12 months basic if the performance related criteria arenot met
- Basic = last month- Variable : paid in the last year(s)
- Change of control- Change of strategy- Number of years of service in a previous position- Condition for obtaining the candidate's agreement
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Belgium: aborted projects
• Max. indemnity of 12/18 months
• 100% tax on indemnities exceeding EUR 1,000,000
• 30% additional tax on indemnities exceeding …months / … EUR
• Amendments applicable to ongoing contracts
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Belgium: imminent act (1)
Wetsontwerp tot versterking van het deugdelijk bestuurbij de genoteerde vennootschappen en de autonomeoverheidsbedrijven en tot wijziging van de regelinginzake het beroepsverbod in de bank- en financiëlesector Status: Senate Listed companies & certain autonomous state
owned companies
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Belgium: imminent act (2)
Corporate governance statement
Incorporated in the annual report
Includes information such as:
- Indication of the applicable corporate governance code
- Comply or explain
- Internal control and risk management
- Remuneration report Cf. corporate governance code 2009
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• Remuneration committee
Belgium: imminent act (3)
Mandatory for (large) listed companies Composition:
Advises on / proposes:
- Non-executive directors (only)- Independent directors (majority)
- Remuneration policy- Individual remunerationIncluding variable remuneration, long term bonusses,stock options, parachutes, etc.
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Belgium: imminent act (4)
• Mandatory publications On global basis:
On individual basis:
- General principles- Compensation executives (other than CEO)- Principles & criteria for variable remuneration- (clawback)
- All compensation for non executive directors- All compensation for CEO- Stock options- Indemnities for early termination
o Agreedo Applied
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Belgium: imminent act (5)
• Parachutes
• Variable remuneration
> 12 months (or > 18 months in case of a motivatedadvice of the remuneration committee)
Criteria
If to independent director (art. 526 :
- Preliminary vote by the ordinary shareholders meeting- Prior consultation of the works council
- In contract- Min. 3 year vesting for stock options (exceptions)- Depend on results in y2 and y3 after grant
- Prior approval by the ordinary shareholders meeting- Prior consultation of the works council
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Belgium: CBFA Circular• CBFA circular 26 November 2009 (n° 34)
Scope: financial institutions Goal: provide financial institutions with principles on a
sound remuneration policy for “important persons” Principles
Follow-up
Supervision
- Variable remuneration capped and performance linked- Minimum deferment period of variable remuneration (partially)- Results of individual & company, cost of capital, liquidity, LT vs. ST- Independent remuneration committee (recommended)- Communication to shareholders
- March 15, 2010: remuneration policy should becommunicated to the CBFA- June 30, 2010: remuneration principles should be applied
- Qualitative and quantitative measures
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Conclusion
• Transparency• Quid privacy protection• New « functions » - liability ?
• Freedom of contract ?
« andere leiders » - draft act« personen met sleutelfuncties » Circular CBFAAdvice « Raad van State »
