The Government Commission on the German
Corporate Governance Code has proposed a number of changes to the Code to
enhance the transparency and understanding of management remuneration.
Specifically, the Commission is recommending that a cap be placed on
remuneration, both in terms of its total amount as well as in terms of its
individual components. In addition, the transparency and traceability of
supervisory board remuneration decisions would be enhanced by supplementing the
criteria that have already been outlined and have to be taken into account.
It is suggested, for example, that when
defining a remuneration structure the supervisory board should consider the
relationship between the remuneration of the management board as well as that
of senior management and total staff, also in terms of its development over
time. Within this context, a new recommendation should be incorporated stating
that the supervisory board defines the targeted level of retirement provision
for the management board and factors in the annual and long-term expense for
the company arising from this.
In order to improve comparability over
time and with other companies, both for the supervisory board and for the
general public, the Commission recommends that important facts and figures on
management board remuneration be prepared in a standardized fashion and that
use be made of tables. Any burden of preparing the new tables is ameliorated by
the fact that the data to be included in the proposed tables is already
available to companies and is already published in one form or another to a
large extent.
In the Commission’s view, consolidating
and standardizing the way the data is presented will provide a better overview
and improve comparability. In view of the potential organizational expense
involved in the conversion, the recommendation regarding information in the
remuneration report and the suggestion on the use of tables at companies would
only be implemented beginning in 2014.