Christoph Van der Elst, Hans De Wulf, Sien Vermeesch

Radicalisering van corporate governance-regelgeving: remuneratie en transparantie na de wet van 6 april 2010

WP 2010-14

This paper analyses the Belgian "Corporate Governance Act" of April 6 2010, which introduces new binding rules on directors' and top executives' remuneration in Belgian listed companies and forces those companies to publish an annual corporate governance report, containing a section on remuneration policies. The Act, clearly motivated by outrage about executive pay in the aftermath of the financial crisis, uses three methods in a (no doubt hopeless) attempt to reduce compensation levels. The first is increased disclosure, including individual disclosure of different parts of remuneration packages for top executives. The second method consists of nudging companies towards better remuneration governance, such as by forcing them to put a remuneration policy on paper and to install a remuneration committee. Thirdly, the most controversial part of the Act introduces rather detailed and hard to apply binding rules on variable compensation (bonuses of all kinds) and termination payments. These will force companies to rewrite existing compensation contracts; executives will have little choice but to agree. As a result of the Act, golden parachutes of more than 12 months worth of remuneration will probably become rare, since the general meeting has to approve them in a binding vote. This Act also is another step in a progressive legislative differentiation between directors based on such factors as independence and expertise which gradually erodes the concept of the truly unitary, collegiate board.