Will the vitriolic declarations from Jean-Claude Juncker regarding the remuneration of senior company directors remain without consequence? On 13 May, the Eurogroup president denounced “scandalous” pay rises, and spoke of “extravagant behaviour” and a ‘social scourge’. Due to lacking of a highly improbable ‘revolt’, Europoliticsnow opens the debate.

The first certainty, reiterated by Economic and Monetary Affairs Commissioner Joaquín Almunia, is that the stakes have changed. The debate is unquestionably recurrent (see below details on the Commission’s recommendations in this field), but unrealistic remunerations paid to certain senior directors in the middle of the financial crisis has resulted in targeted recommendations from the very serious Financial Stability Forum (FSF). In April, the FSF suggested that regulators and supervisors will meet to discuss reducing the “inappropriate” risks being taken (see link to the document below).

Second observation: the (re)launched debate within the Eurogroup, on the Netherlands’ request ⁽¹⁾ (see box), found a certain resonance in Ecofin. On 14 May, Andrej Bajuk, the president of the Council, specified that ministers were “committed to dealing with this question […] because no one is really satisfied with seeing how things are developing” (see Europolitics3530). According to our information, ministers have also committed to sending the Commission a report on the state of affairs in their respective countries and the future French EU Presidency has announced its intention to continue debates on the topic during the second half of 2008.

For the rest, a quite minimalist scenario seems to emerge: firstly because the EU’s powers are relatively limited on the matter (see separate article in this dossier), the issue of remuneration capping evidently not being on the Community agenda. Then, and above all, because Internal Market Commissioner Charles McCreevy clearly does not intend to play a decisive role. “The Commission is not planning any particular measure in this field,” confirmed Oliver Drewes, McCreevy’s spokesperson. Drewes specifies that: 1. the Commission’s 2004 recommendation clearly remains an ongoing concern (member states have to implement it, and all the more so since to present “only the Netherlands have applied it” ⁽²⁾; and 2. given the reluctance of member states and the markets, no more binding instrument seems probable.

So there remains the Commission’s paper whose content – detailed and structured – constitutes a good starting point. At this stage, the Council’s Economic Policy Committee (EPC) believes that it would be useful to identify good practices in use, knowing that many member states have already begun deliberating (and acting) in this field. The European employers’ confederation, BusinessEurope, declined to answer Europolitics’ questions on the matter. The European Trade Union Confederation (ETUC), for its part, is preparing a more in-depth analysis of the situation.

Recommendation 19 from the Financial Stability Forum (April 2008) is available at www.europolitics.info > Search > 226176

The Netherlands at the forefront

From 1 January 2009, new tax provisions should come into force in the Netherlands concerning the taxation applicable to senior directors’ pay. The famous golden handshakes and other bonuses would now be taxed at 30% above an annual net salary of 500,000 euro. Provisions are also planned for companies which increase directors’ salaries as they approach retirement (taxation would increase by 15%). According to the ANPpress agency, investment loan directors could also be taxed by up to 25%. These measures could bring in 60 million euro for the Dutch state, according to Finance Minister Wouter Bos.

⁽¹⁾ The Dutch finance minister lodged this request with the Eurogroup in November.
⁽²⁾ The French economy minister believes that Paris and The Hague are the only two capitals to have played the game.