Executive remuneration reporting in Europe

A number of interesting evolutions are taking place in the field of reporting on executive remuneration, more specifically in firms listed on the stock exchange. Firstly, transparent reporting on executive remuneration is more and more considered to be a proof of good corporate governance. In this respect, it is our experience that, within countries where the same regulatory context applies, important differences can be found related to the degree of transparency on executive remuneration. Secondly, Directive (EU) 2017/828 of the European Commission, also called Shareholder Rights Directive II, puts forward a number of new obligations to the member states in the field of reporting on executive remuneration. 

In order to facilitate the implementation of article 9b of the Shareholder Rights Directive II, the European Commission has developed the ‘Guidelines on the standardised presentation of the remuneration report under Directive 2007/36/EC, as amended by Directive (EU) 2017/828, as regards the encouragement of long-term shareholder engagement’. The guidelines are non-binding and have the objective of helping companies with disclosure on executive remuneration in their remuneration reports, as well as improving comparability and understanding by different stakeholders.

Even though the guidelines are still in a draft version (the most recent one dating 12/07/2019), many listed firms already apply them. Although they are non-binding, the guidelines can serve as an important source of inspiration and provide a good general framework and structure. Furthermore, it can be expected that institutional investors and their advisors will prefer listed firms to disclose information on executive remuneration based on these guidelines.

The objective of this study by Professor Xavier Baeten at Vlerick’s Executive Remuneration Research Centre is to inspire firms related to the design, lay-out and content of their remuneration report. In order to do this, the report is structured according to the European Commission’s Guidelines on the standardised presentation of the remuneration report. 

This report is mainly addressed to listed firms, as the Shareholder Rights Directive and the Guidelines on the standardised presentation of the remuneration report apply to listed firms. However, a number of non-listed firms might also be interested and inspired by this report, if they want to apply the highest standards in the field of reporting on executive remuneration, even though this is not legally obliged.