EU looks to curb corporate pay

The EU has introduced a raft of new measures aimed at restraining pay levels in the corporate sector and making it easier for SMEs to set up in other countries in the region.

The legislation introduced by the EU Commissioner for Internal Markets, Michel Barnier, will make sweeping changes to corporate governance rules for 10,000 companies listed in public markets throughout the region.

“The last years have shown time and time again how short-termism damages European companies and the economy. Sound corporate governance can help to change that. Today’s proposals will encourage shareholders to engage more with the companies they invest in, and to take a longer- term perspective of their investment,” said Internal Market and Services Commissioner Michel Barnier.

“To do that, they need to have the rights to exercise proper control over management, including with a binding ‘say on pay’.

“I also see it as a priority that company law offers European SMEs an efficient framework for their operations and growth. The European Single-Member Company will help entrepreneurs reduce costs and organise their activities abroad,” he added.

Among the changes included in the new guidelines is much greater powers for shareholders in how a company is managed.

The aim is to ensure that the focus is on long-term sustainable growth and not the short-term risk taking that was pervasive in the years leading up to the crisis. Moreover, there will be a ‘say on pay’ clause that enables shareholders to veto executive salaries that are out of kilter with profitability.

An important new step in the area of SMEs would require member states to provide in their national legislation a company law form for single-member private limited liability companies with the same requirements across the EU. It would have a common label — societas unius personae.