Following protests from employers' organizations, the European Commission has watered down plans to limit managers' salaries. The move comes shortly after a similar debate in Germany.
Shareholders should know top managers' salaries, EU officials say
According to the new plan, European companies would be required to publicize salaries for top executives. Shareholders would be entitled to information about managers' pay, including remuneration they receive from subsidiary firms. Stock options and other perks would also have to be published.
But the recommendations, which came as a response to recent business scandals such as the bankruptcies of US giants Enron and WorldCom and Parmalat in Italy as well as the Mannesmann trial in Germany, would not be binding and EU officials also scrapped earlier suggestions to limit executive salaries.
Employers groups, such as the Confederation of British Industry and the Federation of German Industries (BDI) had criticized such a step as an "alarming over-reaction," according to the Financial Times.
The change comes in the wake of a heated debate in Germany about government involvement in limiting salaries of high-level managers.
Deutsche Bank CEO Josef Ackermann and former Mannesmann CEO Klaus Esser were among the defendants in the trial
The July acquittal of top German business executives accused of handing million euro severance packages to Mannesmann managers during the mobile phone company's takeover by British rival Vodafone had provoked calls for legislation that would put a cap on salaries.
German Justice Minister Brigitte Zypries has rejected such an idea, but has threatened to require the publication of salaries by law if more companies don't voluntarily do so within a year.
A non-binding corporate governance codex already requires publication, but only 11 out of 30 companies listed on Germany's stock index (DAX) have complied so far.
Rules for trustees also weakened
Apart from managers' salaries, EU officials also mulled guidelines to ensure the independence of companies' boards of trustees. Frits Bolkestein (photo), the union's internal market commissioner, had originally proposed a strict set of criteria member states should introduce to monitor the independence of board members.
According to that plan, a board member could not have been related to company executives or have been employed by the company three years prior to taking on the position.
In Germany, many chief executive officers end up heading the board of trustees immediately upon retirement. Siemens CEO Heinrich von Pierer, for example, is scheduled to make the move in January.
The new draft now describes these criteria as "additional guidance" and states that "the ultimate decision of what constitutes independence is fundamentally an issue for the board itself." The commission is expected to make a decision in mid-September.