EUROPE - Nine out of 10 European companies are against EU legislation on corporate governance, according to a poll by Hewitt Associates.
Hewitt questioned over 60 public companies throughout Europe about their executive remuneration policies and views on corporate governance. While 90% of respondents rejected the need for a strict, legally binding code, 60% said that EU guidelines on corporate governance – expected next year – would be helpful.
Only a third of respondents had a company code addressing the separation of the roles of chairman and CEO. Four out of 10 had a code which covered the appointment, role and remuneration of the executive and non-executive directors. In a few cases, it set a limit on the number of other boards on which an executive can sit.
Most companies replying to the survey said that decisions related to executive pay were largely in the hands of the remuneration committee. And a majority also said that the main criteria for setting executive remuneration packages were job responsibilities, although individual performance and market practices were additional factors.
Nine out of 10 respondents said their company publishes the compensation package for the board as a whole. However, only half the companies surveyed publish the individual pay package of executive board members.
But the survey suggested that change is on the way. Just over half of respondents believe that the market, together with public opinion, will demand a stronger link between remuneration and performance. And half the companies surveyed said changes would be driven by shareholder demand and the emergence of higher corporate governance standards.
Alan Judes, an executive compensation specialist at Hewitt Associates, said: “Policies and systems have to be decided and put in place, but this is not enough on its own. Shareholders and the market are concerned with actual behaviour.
“Corporate governance practices need to be embedded and monitored on an ongoing basis throughout the whole organisation.”