Directors' liability discharge proposals - report published

Manifest, in conjunction with Morley Fund Management, has published a report titled "Directors' liability discharge proposals: the implications for shareholders". The report, to quote directly from it: 

.... addresses what for many investors has been a largely obscure issue, namely proposals to discharge directors of liabilities that routinely appear on shareholder meetings’ agendas in many European markets. We look at 13 European markets that have resolutions of this type – Austria, Belgium, Denmark, Finland, France, Germany, Greece, Luxembourg, the Netherlands, Portugal, Spain, Sweden and Switzerland; their legal basis and practical implications for shareholders in the voting context".

Netherlands: the re ASMI case and Dutch corporate law

The Netherlands Supreme Court gave judgment last week in re ASMI. An excellent summary, in English, is available on The Defining Tension blog: see here. The case raised important questions concerning, amongst other things, the relationship between the shareholders and the management board as well as the role of the supervisory board.

Europe: the harmonisation of insolvency law

INSOL Europe recently published a report titled Harmonisation of Insolvency Law at EU Law Level: see here (pdf). The report outlines differences between national insolvency laws which create difficulties for companies having cross-border activities or ownership within the EU and identifies areas where harmonisation would be desirable. The report also considers the extent to which the harmonisation of insolvency law could facilitate further harmonisation of company law.

The report contains surveys of the insolvency regimes in the UK, Poland, France, Germany, Spain, Italy and Sweden. References are also made to the law in Belgium and the Netherlands.

Europe: implementation of the Shareholder Rights Directive

The European Commission has announced that it has referred Belgium, Cyprus, Greece, Spain, France, Luxembourg, The Netherlands and Sweden to the Court of Justice for late implementation of the Shareholder Rights Directive (2007/36/EC): see here. In its press release the Commission states:

The Shareholders' Rights Directive introduces minimum standards to ensure that shareholders of companies whose shares are traded on an EU regulated market have timely access to the relevant information ahead of the general meeting and simple means to vote at a distance. The publication of documents on the internet as well as enabling proxy voting and electronic participation are important elements of this. The Directive also abolishes share blocking and introduces minimum standards for the rights to ask questions, put items on the general meeting agenda and table resolutions.

While nineteen Member States have already fully implemented the Directive, eight Member States (Belgium, Cyprus, Greece, Spain, France, Luxembourg, The Netherlands and Sweden) still have to implement some or all of its provisions. Incomplete implementation means that shareholders in those Member states do not enjoy the same rights as elsewhere in Europe and are denied the rights the Directive gives them when investing in publicly listed companies. The deadline for implementation was 3 August 2009".

Executive pay

Several recent posts on this blog (here and here, for example) have highlighted the debate about executive pay in America and Europe. This debate is considered in a couple of articles in this week's Economist. In the first, "Let the fight begin", it is argued that shareholder "say on pay" votes should become the norm and are preferable to Government intervention (it would be surprising if The Economist argued otherwise). In the second, "Pay attention", there is discussion of the debate about executive pay in Europe and the development of "say on pay" rules within the European Member States. The article notes:

By law in the Netherlands, Sweden and Norway, shareholders get a binding vote on compensation packages; in Britain they get a non-binding vote. Some Spanish and Swiss firms are voluntarily starting to offer shareholders a vote".

Netherlands: changes proposed to the Tabaksblat Code

The Dutch Corporate Governance Monitoring Commission has proposed changes to the Dutch Corporate Governance Code (a.k.a. the "Tabaksblat Code"). A summary in English is available in a Word document here. This document also contains the results of a survey of Dutch institutional investors' perceptions of corporate governance in Dutch companies. Many of the changes concern remuneration. The proposed additions to the Code include the following rules:

If a variable remuneration component (shares, options or a bonus) conditionally awarded in a previous financial year would, in the opinion of the supervisory board, produce an unfair result on account of incorrect financial data or special circumstances in the period in which the predetermined performance criteria have been or should have been achieved, the supervisory board may adjust the value downwards or upwards. This power of the supervisory board shall in any event be included in new remuneration contracts with management board members.

If the remuneration committee uses the services of a remuneration consultant, that consultant should not provide advice to any management board member.

The supervisory board should aim to have a diverse composition in terms of age and gender.

For further information see this press release (in Word format).

Update (15 September 2008): The ICGN has published a letter in which it comments on the proposed changes. 

EU: Member States' failure to implement company law Directives

The European Commission has sent reasoned opinions (about which see here) to several countries - including Hungary, the Netherlands and Poland - concerning their failure to implement Directive 2004/109/EC on the transparency obligations of listed companies. The Commission is also bringing a case before the European Court of Justice against Italy with regard to the latter's failure to implement in full Directive 2003/58/EC on company disclosure requirements.

Further information about the above is available here and for information concerning European company law, see here. For the current position on Member States' implementation of company law directives, see here.

The Netherlands: Phillips' AGM: Shareholders reject proposed bonus package

The Annual General Meeting of Royal Philips Electronics was held last week in Amsterdam. At the AGM, according to a report in the Financial Times:

For the first time in Dutch corporate governance history, a majority of shareholders objected to a proposal that would give directors of the consumer electronics giant share options even if the company underperformed. The executive bonus package was rejected by 57 per cent of the votes at the agm and received the strong backing of both the group's foreign investors as well as local Dutch shareholders.

Netherlands: the Code Banken (Banking Code)

The Netherlands Banking Association has published a Banking Code (Code Banken) in response to the report titled "Restoring Trust" published earlier this year by the Advisory Committee on the Future of Banks. The recommendations from chapters one and two of the Advisory Committee’s report have been used as the basis for the new Code. The Code will operate on a 'comply or explain' basis and comes into force on 1 January 2010. It will apply to all banks licensed under the Financial Supervision Act (Wet op het financieel toezicht), irrespective of the location of their activities.

The Code contains principles based on the Dutch Corporate Governance Code (December 2008) and focuses on the operation of executive and supervisory boards, risk management, auditing and remuneration. With regard to remuneration, the following principles are included in the Code (it will be very interesting to see how 6.3.1 operates in practice):

6.3.1  The total income of a member of the executive board shall be in reasonable proportion to the remuneration policy adopted by the bank. At the time when his or her total income is decided, it shall be slightly below the median level for comparable positions in the relevant markets both inside and outside the financial sector. The relevant international context shall be a major factor.

6.3.2  The remuneration in the event of dismissal may not exceed one year’s salary (the ‘fixed’ remuneration component). If the maximum of one year’s salary would be manifestly unreasonable for an executive board member who is dismissed during his first term of office, such board member shall be eligible for severance pay not exceeding twice the annual salary.

6.4.2 Every bank shall set a maximum ratio of variable remuneration to fixed salary that is appropriate for the bank in question. The variable remuneration per annum of members of the executive board shall not exceed 100% of the member’s fixed income".