The European Council has formally adopted the much-debated directive giving shareholders the right to vote on company remuneration policies.
The directive also enables companies to identify shareholders and places new responsibilities on proxy advisers with transparency obligations and a new code of conduct.
Member states of the EU now have two years to implement the directive. A statement issued by the European Council said: “Under the new rules, remuneration policy should contribute to the business strategy, long-term interests and sustainability of the company and should not be linked to short-term objectives.
“Directors’ performance should be assessed using both financial and non-financial performance criteria, including where appropriate environmental, social and governance factors.”
The council’s statement adds: “The financial crisis revealed that shareholders in many cases supported managers’ excessive short-term risk taking. The revised directive is intended to redress this situation and contribute to the sustainability of companies, which will result in growth and job creation.”