Shareholders’ say on pay – Prepare your next general meeting – Last call


In our newsflash dated 6 May 2020, we informed you about the extended say on pay of shareholders introduced by the Revised Shareholders’ Rights Directive (SRD II) and implemented into Belgian law for Belgian quoted companies.

Remuneration report: extended transparency on individual pay disclosure & pay ratio

Shareholders have their word to say on the remuneration report by an advisory vote at the annual general meeting. SRD II requires a.o. the compensation of all company directors and daily managers to be reported on an individual basis and contains extensive disclosure requirements enabling an easy understanding of the relationship between executives’ remuneration and their companies’ performance. 

Explanatory note: help to draft your remuneration report

In November 2020, the Belgian Corporate Governance Committee released a new edition of the explanatory note on the remuneration report. It replaces the edition published in December 2010 related to the 2009 Belgian Code on Corporate Governance – also re edited in 2020 – and the Law of 6 April 2010. The explanatory note on the remuneration report is intended as a supporting document for listed companies in the application of legal obligations resulting from article 3:6, §3 of the Belgian Code on Companies and Associations (BCCA); principle 7 of the 2020 Belgian Code on Corporate Governance; and the drafted Guidelines on the standardised presentation of the remuneration report under Directive 2007/36/EC, as amended by Directive (EU) 2017/828, as regards the encouragement of long-term shareholder engagement.

The explanatory note provides guidance on the content and presentation of the remuneration report. Interestingly, it also highlights the difference in certain requirements of the BCCA compared to the Guidelines of the European Commission. Belgian listed companies may choose to go beyond what the BCCA imposes and to apply (or not) the Guidelines.

On the other hand, the Belgian legislator took a step further with regards to internal equity of pay. Indeed, article 3:6, §3 BCCA requires that in addition to report on the overview of the evolution of (i) the annual remuneration, (ii) the annual company’s performance, and (iii) the annual average remuneration of employees, the company should publish its ratio between the executive’s highest pay and the employee’s lowest paid salary (expressed on a full-time equivalent basis) in the company.

Is your remuneration policy ready to put to vote & disclosure?

One of the novelties under SRD II is the introduction of a binding vote on the remuneration policy and corresponding disclosure. Recall that the remuneration policy needs to be approved by the shareholders at the general shareholders meeting at least every 4 years or at the occasion of every material change to the policy. This means that (non-)executives can only receive remuneration in accordance with the company’s approved remuneration policy. 

After the vote on the remuneration policy at the general shareholder meeting, this policy, as well as the date and the result of the vote, is made public on the company’s website without delay, and should remain freely available to the public for at least the period during which the remuneration policy applies. 

It will be interesting to see how the shareholders will vote on the remuneration policy and to what extent remarks will be made as for many companies in Belgium this will be the first time the remuneration policy is put to vote. Looking at UK market practice we have seen that the first year these policies were put to vote a higher number of remarks and discussion points have been put forward but this has significantly dropped the second year of voting as many companies have taken the input at heart. 

Note that also in Belgium the number of remuneration-related items on the agenda significantly increased in 2020 compared to 2019. We anticipate a similar interest for 2021. For more insights on the previous proxy season, you may also consult our Corporate governance and executive pay report published at the end of 2020.

If you want more information or assistance in preparation of the remuneration report or policy for future AGMs please do not hesitate to contact Bart Van den Bussche or Bart Lombaerts.