Mon, Mar. 16, 2009

Management Pay: Remittitur

CK - Washington.   The compensation of management in publicly-held corporations should be reasonable, avoid excess, base bonus payments on achievements and consider long-term performance -- those are the key mandates in a bill approved by the Berlin cabinet.

The government will not define what is appropriate. Instead, in a carrot-and-stick approach, it provides the board of directors with guidance and enhanced authority, such as:
1. Guidelines will cover salaries and perks, including bonus payments.
2. Stock incentives may be exercized not sooner than four years after their grant.
3. The board receives authority for remittitur; it may reduce compensation despite contractual terms to the contrary.
4. Decisions on compensation must be made by the full board, not just committees, in order to enhance transparency.
5. Board members will become liable to the corporation for irresponsible grants of compensation.
The Berlin Attorney General published the bill with draft language as a guide for the majority factions in the federal parliament, Bundestag, on March 4, 2009.


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