Around 10000 listed companies across Europe might have to change the way they pay their top executives.
Aimed at making companies more accountable to their owners, new plans were unveiled by the European Commission on Wednesday that will require companies to get shareholder approval on payment policies, at least every there years.
“We want to increase transparency in all the main players for the governance of listed companies, the companies themselves, shareholders, institutional investors, asset managers and voting agencies. Why? Because we wish to encourage them to engage far more in cooperate governance.” EU Internal Market commissioner Michel Barnier said.
Under the new draft law, EU companies would have to explain how their payment policies contribute to the long-term interests of the company. They would also have to set a maximum salary for executives.
EU commissioner for Internal Market Michel Barnier hopes the new draft law will end “short-termism”.
“A European framework for shareholder identification; this way it will be easier for listed companies to engaging the dialogue with their shareholders and vice-versa, they know one another. Two: Increased transparency of institutional investors and asset managers so that they get more fully involved in the long term. Three: Have greater transparency for the so-called proxy advisors and fourthly: Offer better conditions for shareholders so that they can monitor policy on remunerations.” EU Internal Market commissioner Michel Barnier said.
The proposal still needs approval from EU states and the European Parliament.