| BRUSSELS/LONDON, March 6
BRUSSELS/LONDON, March 6 European officials,
emboldened by a victory over banker bonuses, will propose
legislation this year giving shareholders voting rights to
challenge executive pay at public companies.
Corporate largesse is under attack across Europe with
Switzerland last week voting to impose some of the world's
strictest controls on executive remuneration amid public anger
at Wall Street-style excess in the country's boardrooms.
The European Commission, which writes the first draft of EU
law, is working on a proposal for similar rules that would be
applicable across all 27 countries of the European Union.
"I am in favour of making shareholders more responsible on
pay. I am currently working on EU legislation that would give
shareholders a mandatory say on remuneration," Michel Barnier,
the commissioner for regulation, told Reuters on Wednesday.
A spokesman for the Commission said Barnier's proposal would
be made before the end of the year. It is targeted at
shareholders rather than actual pay limits, which would be
contrary to existing law.
European lawmakers pushed through the world's toughest
limits on banker bonuses last month, meaning that star traders
and high-flying rainmakers at European lenders will face a basic
bonus cap at the same level as their base salary, likely from
They would be in a position to toughen the Barnier proposal
if the felt it did not go far enough.
Sharon Bowles, one of the EU lawmakers who negotiated the
cap on banker bonuses, said many in the European Parliament also
want to see more modest executive pay across all sectors.
"We would like to see that there is more restraint in
executive pay in general," she said. "While we cannot have
wholesale interference in people's pay, it is right to empower
shareholders as the Swiss have done."
Political leaders in France and Germany have also voiced
support for compensation rules modelled on those of Switzerland
with French Prime Minister Jean-Marc Ayrault saying Paris should
"take inspiration" from the vote in its neighbour.
Germany's Chancellor Angela Merkel has signalled she would
rather rules on executive pay were worked out on a European
Union-wide level but she may yet be pushed into action to avoid
appearing soft on the corporate wealthy in the run up to federal
elections in September.
The main opposition party, the Social Democratic Party, has
said current rules which give German shareholders an advisory
"say on pay" need to be hardened up, while the junior coalition
party, the Free Democratic Party, has vowed to come up with
proposals before the elections.
Ironically, Britain, which was the only member state to
oppose a cap on bank bonuses, is set to introduce the toughest
rules on executive pay in the EU this October when legislation
that gives shareholders a binding vote on pay and so-called
golden parachutes - exit payments - passes through parliament.
Some investors argue binding votes are impractical and risk
excessive meddling in the management of companies by
shareholders who may not have the resources to understand fully
each firm they invest in.
Others say they are simply unnecessary.
"There is often too much focus on pay at the expense of
talking to companies more broadly about their strategy," said
Jennifer Walmsley, who deals with companies on issues such as
executive pay at Hermes Equity Ownership Services, a part of
Hermes Fund Managers.
"A binding vote on pay is probably unnecessary in countries,
such as the UK or the Netherlands, where investors already have
the power to challenge pay decisions."
Last year, investors, fed up with falling share prices and
poor returns, rebelled against large pay awards at a number of
UK companies, in what became known as the "shareholder Spring".
Andrew Moss, the chief executive of insurer Aviva and
Sly Bailey, head of newspaper group Trinity Mirror, were
high profile casualties. Martin Sorrell, head of advertising
agency WPP, saw his 6.8 million pound award blocked.
But Europe's largest shareholder advisory firm, PIRC, whose
clients run more than 1.5 trillion pounds in assets, said real
muscle was still needed.
"In the shareholder spring, we only saw about half a dozen
companies on the UK's main market defeated on pay issues so
there is still a long way to go in our view. If you want to
actually stop companies from doing this, rather than just fire
off warning shots, then you need to have real power," said Tom
Powdrill, a spokesman for the London-based firm.
Germany has advisory "say on pay" votes in response to anger
over inequality and corporate excess and similar regulation is
currently winding its way through the French parliament.
French shareholders can already vote - in an advisory role -
on stock options, golden parachutes or other such special
rewards but a proposal to institute a broader 'say on pay'
policy covering all forms of executive compensation and caps on
CEO pay may be voted on later this year.
The United States introduced non-binding "say on pay" votes
in 2011 but corporate rewards can still be huge. H.J Heinz
said this week its chief executive would get about $56
million if he loses his job following the firm's acquisition by
Berkshire Hathaway and 3G Capital.