EU Ministers Call for 'Say on Pay'

While the financial crisis hits Europe with much of the damage seen in the United States, government officials there are also taking up discussions on executive compensation, with a consensus building that shareholders should determine pay levels. A meeting today and tomorrow in Luxemburg between the finance ministers and government officials of the European Union has Say on Pay as a crucial part of its agenda.

A draft set to be adopted Tuesday determines that shareholders should have the right to dictate the pay packages of public company executives. The topic has received increased attention lately due to Europe’s sinking financial climate, in part triggered by mortgage-backed security failures in the United States.

Public consensus in Europe is that company executives are receiving undue financial rewards in the face of plummeting share prices. “Performance should be properly and comprehensively reflected in executives’ pay…which should be appropriately linked to the contribution of the executive to a company’s success,” according to the drafted conclusions.

As in the United States, particular cases of perceived compensation excesses have largely motivated the drive to Say on Pay. The Belgian prime minister, Yves Leterme, has come down on the outgoing chief executive of Fortis, a Belgium bank that was bailed out by the government. Former CEO Herman Verwilst left the bank with a $5.4 million payoff which Leterme has demanded he forego.