Over the last few years, remuneration in public companies has received considerable attention in both academic and public discourse. Several national and international initiatives have reformed remuneration practices to achieve various objectives, including improving shareholder engagement, encouraging active monitoring by (independent) directors, achieving corporate sustainability, and incentivising long-term value creation. Although these trends have had a significant impact on practice, large differences in remuneration practices still exist.

On the afternoon of 23 May 2024, the Jean-Pierre Blumberg Chair organizes a conference on the topic of “Recent trends in the remuneration of executives and directors”. The conference aims to improve the understanding in Belgium and Europe of the dynamic topic of remuneration of executives and directors. The conference brings together theory and practice through academic presentations that contain empirical evidence on remuneration practices, and through a panel discussion of prominent practitioners (moderated by Charles-Antoine Leunen, Linklaters). 

More information and registration can be found via this link. Below follows a brief teaser of what conference participants may expect.

Remuneration of independent directors in shares

The Belgian Corporate Governance Code of 2020 contained a provision that was radically new in Belgium: non-executive directors (including independent directors) should receive part of their remuneration in shares of the company. A few years later, it is safe to say that the provision has not been an overwhelming success, as many companies “explain” why they deviate from it, rather than comply. 

In his presentation at the conference, Pieterjan Heynen (KU Leuven) will discuss the advantages and disadvantages of remunerating independent directors in shares, compare the Belgian approach to the approach in other countries, and provide new empirical evidence on which companies are deviating from the Corporate Governance Code, and why.

Say-on-pay voting

Belgium has known advisory say-on-pay voting on the remuneration report since 2012, and binding say-on-pay voting on the remuneration policy since 2020, in line with the EU Shareholder Rights Directive II. A few years after these legal initiatives, the question arises: what have shareholders done with these rights?

During the conference, Christoph Van Der Elst (Ghent University & Tilburg University) will present new empirical evidence on shareholder voting on Belgian remuneration reports and remuneration policies in recent years, which will help us understand the impact of say-on-pay voting in Belgian practice.

The long-term structure of executive compensation

A long-standing debate exists on how corporate governance can combat short-termism and incentivize long-term value creation by corporations. The Jean-Pierre Blumberg Chair is currently running an FWO-funded research project on “short-termism in European corporate governance”. Executive compensation is an important element of this debate.

Theo Monnens (University of Antwerp) will discuss during the conference how executive compensation can be designed to incentive long-term behavior. He will also present hand-collected evidence on which tools are used in the compensation of CEOs of Belgian companies to foster a long-term perspective. In particular, he will analyze which companies use long-term incentive plans, whether CEOs receive part of their compensation in shares and whether these shares are subject to lock-up periods, whether CEOs have to meet minimum shareholding requirements, and many other factors that may impact a CEO’s incentive to think about the long term. 

ESG targets in executive compensation

More and more, companies are not only thinking about long-term value creation for shareholders, but also about incorporating “environmental, social and governance” (ESG) factors in corporate decision-making. This has led to a recent trend of incorporating ESG targets in executive compensation. This trend has not been without controversy, as some have argued (e.g. Bebchuk and Tallarita) that the use of ESG targets has mainly served the interests of executives, rather than those of stakeholders.

During the conference, Bettina De Ruyck (Vlerick Business School) will present her research on the extent to which shareholders support the use of ESG targets in the compensation of CEOs of large European companies. Her conclusions are nuanced: the use of ESG targets in CEO compensation is associated with higher shareholder approval in say-on-pay votes, but only when outside reviewability (e.g. financial disclosures and ESG transparency) and inside reviewability (e.g. board independence) are high. 

Pay complexity

With all the developments mentioned above, it is unsurprising that executive compensation has become more and more complex – something companies and stakeholders have been criticizing. 

Marthe Van Hove (Vlerick Business School) will present evidence on pay complexity in large European companies. She will also show how the level of pay complexity is associated with ownership and governance characteristics of companies, and what the impact is of pay complexity on companies’ financial performance. 

Conclusion

Remuneration of directors and executives is a topic that has seen many developments recently, and the conference of 23 May gathers several experts that will provide evidence on how these developments have been taking shape. 

Are you interested by the developments described above? You can find more information on this website. Registration is free for students and academics, while registration for practitioners costs € 100,00 and includes accreditation for the OVB, IBJ, and Compliance Officers of the FSMA.

Tom Vos
Assistant professor, Maastricht University
Visiting professor, Jean-Pierre Blumberg Chair at the University of Antwerp
Attorney, Linklaters LLP