Local view for "http://purl.org/linkedpolitics/eu/plenary/2010-07-06-Speech-2-454"
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"en.20100706.30.2-454"2
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"Madam President, Commissioner, ladies and gentlemen, I should like to start by thanking the shadow rapporteurs for the constructive cooperation that has enabled us to establish what is, in my view, a coherent package of opinions and recommendations.
The financial crisis has made clear that remuneration policies in the financial sector have been excessively geared towards short-term profits and that this has encouraged risk-taking behaviour, with all the associated consequences for the economy as a whole in the wake of the banking crisis. In addition, the limited impact of non-binding recommendations on remuneration policies has been demonstrated, and so it is important that we lay down ground rules aiming to contribute to sustainable growth of the companies involved and of the economy as a whole. The political agreement concerning the Capital Requirements Directive just proposed by my colleague, Mrs McCarthy, is an important step forward, as it sets out, for the first time, binding provisions concerning the structure and payment of bonuses in the financial sector. The limits on payment in cash, the stipulation that there must also be the possibility of limiting bonuses in the event of underperformance, and the spreading of bonus payments over several years strike me as particularly important aspects.
My report seeks to show that this is insufficient and that we need to look at remuneration policies from a broader perspective and strengthen the corporate-governance rules so that the ground rules and internal procedures for all the companies in the financial sector, on the one hand, and listed companies, on the other, meet the same criteria.
To begin with, it is important to exercise and expand sound internal and external supervision of remuneration policies. Therefore, companies should have a remuneration committee, which must be independent, and is accountable to the shareholders and supervisors, who must also be given access to all the potentially relevant information. This committee should also be able to cooperate closely with the risk committee on the evaluation of the incentives created by the compensation system. People engaged in risk control should, of course, be independent from the business units they control, be able to assert sufficient authority and be compensated independently of the performance of the business units under their supervision.
Risk management arrangements should be reviewed in detail by the supervisor, and companies should establish an internal procedure to address problems and conflicts which may occur between risk management and its operational units.
The remuneration itself must reflect the company’s long-term performance as far as possible. Bonuses should not just be guaranteed. The levels of variable remuneration should be based on predetermined and measurable performance criteria, which should be not only quantitative but also qualitative in nature. In addition, in the interests of social justice and for ethical reasons, the difference between the highest and the lowest remuneration in a company should remain reasonable. A proportion of variable remuneration should be paid out over a sufficient period. Furthermore, more than half should be paid out in shares or share-linked instruments, and effective recovery of a proportion of these bonuses must be possible. Also, an upper limit of two years’ pay should be set for severance pay, which should certainly be banned in cases of non-performance or voluntary departure.
With regard to transparency, it is important that details of companies’ pension and supplementary pension arrangements be published and that shareholders be able to express their views on their company’s remuneration policy. We also call for the development of an international structure enabling disclosure of the individuals earning upwards of EUR 1 million, to include the main elements of salary bonuses, long-term pay and pension contributions.
We call on the European Commission to continue its work and develop strict, binding principles on remuneration in the financial sector on top of those we have already agreed. We call for the establishment of a system for listed companies that provides full transparency, enabling us to find out which companies are keeping to the arrangements and which are not. I think that we can go even further in this matter. Commissioner, I am looking forward to your proposals on corporate governance, which have been announced in the Green Paper, as that is another dossier we shall certainly be continuing to work on in the coming months and years."@en1
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