KPMG Analysis: New legal requirements on leaders remuneration of the listed companies

KPMG Analysis: New legal requirements on leaders remuneration of the listed companies

On June 10, 2019, Romania would have had to transpose European Directive 828/2017 on the exercise of certain shareholder rights in listed companies, but the document is still under public debate.

The Directive introduces new provisions on shareholders' involvement in remuneration to directors of companies in which they are investing and new requirements for making available to the public a detailed set of information on the amounts awarded to these persons.

The Directive aims at increasing the involvement of shareholders in the remuneration of directors by voting on the applicable Remuneration Policy and the Remuneration Report that testifies how the policy has been applied.

On the other hand, the Directive aims to increase the transparency of the amounts received by these people, by providing a legal framework obliging companies to make available to the public the exact amounts received by the directors of the companies listed on the stock exchange.

In this context, KPMG Romania has launched an analysis of the New Legislative  Requirements for the Leadership of Listed Companies.

It contains a detailed description of these new legislative requirements deriving from the implementation of the Directive in the national legislation of Romania, a summary of the national and European legislative framework, as well as an analysis of the current degree of transparency regarding the remuneration of persons falling within the scope of the Directive (what kind of information makes the companies public, the degree of comparability and the way this information is presented) and to what extent the current remuneration policies and practices of drivers are in line with the new provisions introduced by the Directive.

"At present, companies provide a low level of information to the public. Of the 16 companies analyzed, there is no company that fully complies with the requirements of the Remuneration Policy Directive. As far as the Remuneration Report is concerned, even if some companies do not prepare a Formal Remuneration Report, they comply with some of the requirements of the Directive on the Publication of Remuneration Information by the Leaders. There are even two companies whose Remuneration Reports fully comply with the requirements of the Directive, " explains Madalina Racovitan, Fiscal Consultant Partner and Head of People Services, KPMG in Romania.

Corporate governance of European Union companies is an area of ​​interest for the European Commission and, therefore, the Directive aims to ensure a consolidated, uniform legal framework Union level, which would increase the long-term sustainability of European companies, more efficient monitoring, increased transparency in decision-making processes, more active involvement of shareholders and discouraging practices and decisions that generate artificial growth short-term income.

Thus, the way of remuneration of the listed companies 'leaders and the alignment of their interests (through the remuneration received) to the shareholders' interests, as well as the transparency of this information to the market, are key issues in the new regulations. "Our analysis aims to be a useful and reference guide for those interested in the transparency level of companies listed on BVB, as well as companies listed or intending to list in order to identify those issues that need to be considered regarding executive pay, "adds Racovitan.

Racovitan concludes: "After the amendments to Law 24/2017 on issuers of financial instruments and market operations came into force, we expect a period when companies listed on the BVB comply with the new requirements. Although the new Directive comes with stricter compliance requirements, with additional administrative burdens involving additional costs and resources allocated by listed companies, the Directive aims to provide a coherent legal framework at EU level that encourages dialogue between all stakeholders, ensures sustainability term European companies and lead to better monitoring and uniform practices in the Member States of the European Union. "