The Bundesrat

Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directive 2007/36/EC as regards the encouragement of long-term shareholder engagement and Directive 2013/34/EU as regards certain elements of the corporate governance statement

Scrutiny details

Subsidiarity deadline: 10/06/2014
Scrutiny Information

Scrutiny date: 11/07/2014

Subsidiarity Concern:

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  Political Dialogue

11/07/2014 | Scrutiny results - COM20140213

On its 924th plenary session on Friday 11 Juliy 2014 the German Federal Council (Bundesrat) adopted the following contribution, addressed to the European Commission, in the context of the political dialogue.

As to the COM(2014) 213 proposal, the Bundesrat supports Commission's aim to facilitate shareholders voting practice and therewith strengthen their role within the company. Especially the aim to make recompense policy more transparent and to link performance and recompense of members of the company's management is widely shared by it.

However, the proposal foresees that shareholders have to decide on the recompense of the management board. The Bundesrat does not support this provision, as it considers that shareholders are often not concentrated on a long-term perspective of the company. Mostly, they are more interested in short-term success of the company as this will boost the return. Therefore, it supports rather a system, in which the supervisory body of the company fixes the structure of recompense of the company's management.

Moreover, the Bundesrat explicitly supports the introduction of a obligation to put in relation the recompense of the company's employees and its management board, as foreseen in Article 9a para. 3 of the proposal. However, it regrets that there is no firm relation foreseen, as such tool would strengthen the acceptance of the employees for the management's board recompense. Therefore, the Bundesrat advocates for a maximum limit of this relation, which must not be exceeded.

As recompense may consist in fix and variable parts, the Bundesrat recalls that especially incentives may motivate members of company management to undertake risky operations with high return assumption. Therefore, it advocates for a fix limit of variable parts of recompense, which must not be exceeded, too.

Finally, the Bundesrat is very sceptic about the provisions foreseen in Article 9c of the proposal concerning the control of company's business with related companies. The foreseen requirement of an agreement given by the shareholders general assembly for specific kinds of transactions will lead to paralysis of company's decisions, especially in times when quick reaction is needed. Therefore, the Bundesrat rejects this provision.

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