Brussels, 04/10/2004 (Agence Europe) - On Wednesday, the European Commission is expected to tackle the matter of golden handshakes and other perks enjoyed by company directors unknown to shareholders. Recommendations were made to the College fixing the rules for keeping shareholders informed of any elements that make up directors' earnings and for shareholders to be able to speak out on the matter during general shareholders' meetings. The aim is to avoid conflicts of interest given that directors fix their own earnings. The Commission had announced this summer, after a last consultation with the parties concerned, that these recommendations should apply to all companies quoted on European stock exchanges, whether or not their head office is registered in Europe.
Commissioner Frits Bolkestein thus, in his mandate, puts the final touches to the action plan on eGovernment, which was launched in May 2003 after, notably, the Enron, WorldCom and Parmalat affairs. The recommendations state that companies should keep their shareholders informed of their wage policy for coming years. Information should specify the relative importance of variable and non-variable components in earnings, and the criteria of "success" to justify the granting of stock options, bonuses or advantages of a non-financial kind. Companies should also keep their shareholders informed on the financial clauses relating to benefits for company directors when directors come to the end of their contract or are compelled to leave their post early. In other words, they should announce that directors will benefit from a departure premium, or golden handshake, if they are dismissed. The recommendations also insist on making public the individual earnings of directors including financial and non-financial advantages, shares, complementary retirement schemes or loans and guarantees afforded by the company.
To ensure that shareholders are allowed to have their say, the recommendations provide for the question of earnings to be automatically included on the agenda of the company's general shareholders' assembly, which would be expected to give its stance on the granting of loans and the conditions linked to stock options.