Earlier this year EU regulations on governance, known as the Shareholders’ Rights Directive (SRD), were approved by the European Parliament after significant debate over SRD’s content and consequences. SRD is comprised of a set of regulations meant to increase transparency and strengthen the shareholder’s position.
One of the most important, debated considerations was whether a so-called “pay ratio” should be part of the SRD. Pay ratios will likely be part of U.S. and U.K. disclosure, as of next year, and already they’re proving potentially very troublesome to calculate.
Even though pay ratios did not make it into the final SRD text, the SRD does include the obligation to disclose the “progression of director pay versus average pay” against company performance. This is not as strict as a pay ratio and, in fact, does not entail disclosing a pay ratio figure. It does, however, require careful consideration as to how to approach this disclosure and annual calculation.
Read our new Executive Compensation Bulletin for all the details on the SRD’s impact by clicking on “DOWNLOAD PDF” above or below.
Mark Reid is the global leader for Willis Towers Watson’s executive compensation practice, based in London. Sven Slavenburg is a director and practice leader in Western Europe for the executive compensation practice, based in Amstelveen. Ralph Lange is a manager for the executive compensation practice, based in Cologne, and Rich Latham is a senior consultant for the executive compensation practice, based in London. Email firstname.lastname@example.org, email@example.com, firstname.lastname@example.org, email@example.com or firstname.lastname@example.org.