The Foreign Equities Division recently made revisions and enhancements on policies pertaining to corporate governance, placing more concentration on lasting compensation strategies and improve the authority of the administrative board over the structure of compensation programs. Under such revision, the administrative board must define the full compensation of the individual management board members and consistently evaluate their compensation system. Enterprise compensation must be a suitable figure referenced on a productivity appraisal, taking into significance any expenditure by group companies.
The principle for identifying the suitability of compensation are the mutual tasks of the individual member of the management board, their professional productivity, the financial standing, the productivity and position of the enterprise, as well as the general degree of the compensation taking into account counterpart firms and the compensation framework in place in other areas of the enterprise.
If the administrative board requests an outside compensation specialist to assess the suitability of the compensation structure, thoroughness must be employed to make sure that the specialist is unconstrained by both the management board and the firm.
Extensively, the policy now presents the compensation framework must be leaning toward continuing progress of the enterprise. All compensation elements must be suitable, both individually and in general terms, and in specific must not persuade the taking of unnecessary risks.
The administrative board must also ensure that the different compensation rudiments, such as periodic incentives, are referenced on a cyclical productivity appraisal. Both positive and negative progress must be taken into consideration when identifying variable compensation elements.
For example, share-based compensation components, such as stock rewards and options, must be linked to challenging comparison criteria. Enhancing such productivity targets or the comparison criteria analytically must be debarred from the compensation strategy. For special cases, a ceiling on compensation can be implemented by the administrative board.
The policy requires and authorizes the admission of the total compensation, by name, of each one of the members of the management board, distributed into fixed and varying compensation elements. Similarly, there must be admission of any additional rewards to board members. Admission may be handed out if a periodic meeting of stakeholders agrees to a resolution to this effect by required majority.
In order to increase transparency, the policy necessitates both the management and administrative boards to document and submit each year on the company’s corporate governance in the annual report, including a detailed report of possible variation from the policy. The enterprise must keep previous admissions of conformity with the policy available for review and further assessment.
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