EC wants remuneration reform

It seems everyone (including PIRC) is setting out their ideas for reform of remuneration these days. Latest to chip in ideas is the European Commission. Having recently aggravated the alternative investments industry with its proposals on hedge funds and private equity4 (seen by some as an attack on London as a financial centre) the EC has now set out thoughts on how to reform remuneration in financial institutions, and for company directors more generally.

Much of what the EC says on directors’ pay is a restatement of best practice in many markets, but there are one or two ideas that push the debate further on. For example, it calls on companies to be allowed to instate clawback provisions. This is an idea that is gaining ground, so it’s interesting to see policymakers start to promote it.

And what about this one: “[member states could] ensure that shareholders, in particular institutional investors, attend general meetings where appropriate and make considered use of their votes regarding directors’ remuneration;”

This would be hard to police, but the sentiment of requiring investors to make proper use of their voting rights is surely one many of us would share.

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