BRUSSELS â€" A European Union official renewed his efforts to curb excessive pay by introducing a plan on Wednesday that would require a shareholder vote on salaries for directors of publicly traded companies.
The proposal by Michel Barnier, the European Union commissioner for financial affairs, reflects a trend on both sides of the Atlantic driven partly by concern over outsize pay packages for corporate bosses. Concern has persisted over excessive corporate pay as wages and benefits for most employees have stagnated.
“I cannot explain this enormous gap between this level of pay and corporate governance, and it does leave you with a pretty bitter taste in your mouth when you see the excessive levels of pay in certain cases,†Mr. Barnier said during a news conference here.
Mr. Barnier successfully pushed the European Union to cap bankers’ bonuses, though firms are trying creative approaches to sidestep new rules.
Under Mr. Barnier’s new proposal, shareholders would have the right to vote every three years on company plans that outline the maximum remuneration levels for board members. The plan would affect about 10,000 companies listed on European stock exchanges.
Mr. Barnier’s plan would leave it to European Union member states to write additional rules outlining how companies should respond if shareholders reject the director pay plans.
In addition, shareholders would be able to express their opinion in an annual vote on whether they were satisfied with how a company’s remuneration policy was being applied.
In case of a negative vote by shareholders, the company would need to justify its pay policy as part of the following year’s report.
The European proposal would overhaul existing shareholder rights requirements and introduce a “say on pay†principle that goes further than many of those already announced by national governments in Europe.
Such rules were also part of the financial overhaul in the United States in the wake of the financial crisis. But some critics question the effectiveness of these rules.
One concern is that shareholders may have little incentive to rein in pay when company share prices are rising.
The European proposals could meet substantial opposition from business lobbies during a lengthy approval process involving national governments and the European Parliament that seems likely to stretch into next year.
Mr. Barnier’s draft rules are ‘‘more onerous in some respects’’ than similar rules introduced in Britain last year, according to Alexandra Beidas, a lawyer at the firm Linklaters in London.
Mr. Barnier insisted that he was not proposing strict limits on salaries for company directors.
‘‘We’re not there to set salaries for companies in general’’ because ‘‘we’re no longer in a command economy, fortunately,’’ he said.
But Mr. Barnier emphasized that Europe needed a ‘‘means of ensuring that the individual interests of directors were consistent with the long-term interests of the company.’’
‘‘It’s good governance that we’re talking about,’’ Mr. Barnier said.
The European Union agreed to cap bankers’ bonuses â€" as proposed by Mr. Barnier in 2011 â€" as part of a hard-fought deal agreed to by the Parliament and national governments last year.
Those limits restrict bonus payments to one year’s base salary, though that figure can be doubled if a majority of shareholders approve.
The legislation applies to all banks active in Europe, as well as the international subsidiaries of European banks with their headquarters in the union.
