Bill stricter remuneration for the financial sector
On 5 July 2019, the Minister of Finance opened a new internet consultation on the draft bill for the Act on Further Remuneration Measures in the Financial Sector (Wet nadere beloningsmaatregelen financiële sector). This internet consultation follows an earlier internet consultation on the same subject in the summer of 2018.
The proposed measures are intended to prevent perverse incentives associated with remuneration in the financial sector and to promote public support for and confidence in the financial sector as a whole. The measures concern both listed and non-listed financial companies and apply to directors and other employees. The government refrains from its plan to introduce a claw back of fixed remuneration of directors of banks that received state aid. The Council of State gave a negative advice on this measure because it was not in conformity with European regulations.
The draft bill includes the following measures:
- Retention period for shares and similar financial instruments
The draft bill introduces a legal obligation for directors and employees of financial companies to hold shares that are part of fixed remuneration for a period of at least five years. This also applies to similar financial instruments that are part of the fixed remuneration and whose value depends on the value of the company, such as options. Options may not be exercised during this five-year period.
- Accountability for remuneration policy
The draft bill introduces the legal obligation for a financial enterprise to account for and be accountable for the relationship between remuneration and the function of the financial institution in the sector and its position in society. It concerns the relationship between the remuneration of management board members, supervisory board members and other employees of the enterprise.. Financial companies must describe this in their management report. This obligation will only apply to financial enterprises that are obliged to draw up a management report pursuant to the Financial Supervision Act (Wet financieel toezicht, “Wft”).
- Tightening of the possibility of deviating from the bonus cap
The draft bill introduces a tightening of the possibility to derogate from the bonus cap for personnel who are not subject to a collective bargaining agreement., This is achieved by emphasizing that this is only possible in exceptional cases, and that the following employees may in any case not make use of this exception: (i) those performing internal control positions, (ii) those directly engaged in providing financial services to consumers. In the explanatory notes to the preliminary draft, the government states that an exceptional case is present when a deviation from the bonus cap is necessary in order to ensure the continuity of the business operations or services of the financial enterprise.
- Annual reporting obligation in the event of deviation from the bonus cap
The draft bill introduces an annual notification requirement for financial companies that use the deviation from the bonus ceiling. The use must be reported to the regulator, but no prior approval is required.
Intended date of entry into force and transitional law
It will be possible for anyone to respond to this draft bill until 30 August 2019. The intended date of entry into force of the measures set out under 1, 3 and 4 above is 1 January 2021. The companies will have until 1 January 2022 to make new agreements on the terms and conditions of employment of employees already working for them on 1 January 2021. Only for the measure under 2 the proposed date of entering into force is 1 January 2022, one year later than the other measures.
Maureen te PoelCounsel Attorney at law
Maureen te Poel, attorney at law, is a member of the Employment & Benefits practice group. She has over 21 years of experience as a lawyer, of which 8 years in the M&A department. The last 13 years she has been focusing on all-round employment law, with a particular focus on the employment aspects of M&A-deals and restructurings, co-determination procedures, remuneration structures and sector-specific regulations on remuneration.T: +31 20 578 54 64 E: email@example.com