A summary of recent developments in Belgium with regard to the remuneration of directors in listed companies and government owned companies, and a summary of the CBFA\'s circular on remuneration of important persons within financial institutions. Client seminar presentation of 29 March 2010

1. Directors Remuneration and Golden
Parachutes:
a State of Play
David Ryckaert,
Advocaat-Avocat Simont Braun
Louizalaan 149/20 Avenue Louise
Brussel 1050 Bruxelles
www.simontbraun.eu March 29th, 2010

2. Background
• Financial crisis
• Banks in distress
→ Ethical and social view on management
remuneration
→ Setting management remuneration is not the
result of sole economic factors
2

3. International reactions (1)
• G20: Framework for Strong Sustainable and Balanced
Growth – Financial Stability Board
• European Corporate Governance Forum
• US
3

4. International reactions (2)
→ Main ideas:
- Role of listed companies & systemic organisations
- Transparency
- Variable pay
 performance related and deferral
 Clawback
 Stock options
- Severance pay:
 2 years maximum
 None if poor performance
- Recommendations
4

5. Our neighbors: recommendations on
parachutes
• UK combined code 06/08
• 1 year (?)
• Germany : corporate governance code 06/08
• 2 years (total compensation past year)
• France : MEDEF recommendation 10/08
• 2 years (basic + variable)
• Dutch corporate governance code 12/08
• 1 year basic (exceptionally 2 years)
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6. Belgium: evolution
• Labour agreements act (art. 82, §5)
• « Corporate governance act » (2002)
• Code Lippens (2004)
o = Corporate Governance Code (2009), except for
parachutes
• Code Buysse (2005)
o = Code Buysse II (2009)
• Audit committee act (2008)
• (?) « Corporate governance act 2010 »
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7. Belgium: corporate governance code
(°2004, updated 2009)
 Scope : listed companies
 Recommendation : comply or explain
 Sanctions :
- Market perception
- Liability
 Remuneration committee : principle 5
 Reason: compensation management & board
members
→ Board of directors
=> Conflict of interests
7

8. Belgium: remuneration committee
• Composition:
Non-executive directors (only)
Independent directors (majority)
HOWEVER : non compliance : explain : nominations
• Powers:
Remuneration policy
- Main conditions (including pension and parachute)
- Elements and pondering
- Basic en variable
Individual remuneration including a « parachute »
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9. Belgium: parachutes
• Parachutes
 12 months basic + variable
- Basic = last month
- Variable : paid in the last year(s)
 18 months in certain cases only
- Change of control
- Change of strategy
- Number of years of service in a previous position
- Condition for obtaining the candidate's agreement
 12 months basic if the performance related criteria are
not met
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10. Belgium: aborted projects
• Max. indemnity of 12/18 months
• 100% tax on indemnities exceeding EUR 1,000,000
• 30% additional tax on indemnities exceeding …
months / … EUR
• Amendments applicable to ongoing contracts
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11. Belgium: imminent act (1)
 Wetsontwerp tot versterking van het deugdelijk bestuur
bij de genoteerde vennootschappen en de autonome
overheidsbedrijven en tot wijziging van de regeling
inzake het beroepsverbod in de bank- en financiële
sector
 Status: Senate
 Listed companies & certain autonomous state
owned companies
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12. Belgium: imminent act (2)
 Corporate governance statement
Incorporated in the annual report
Includes information such as:
- Indication of the applicable corporate governance code
- Comply or explain
- Internal control and risk management
- Remuneration report
 Cf. corporate governance code 2009
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13. Belgium: imminent act (3)
• Remuneration committee
 Mandatory for (large) listed companies
 Composition:
- Non-executive directors (only)
- Independent directors (majority)
 Advises on / proposes:
- Remuneration policy
- Individual remuneration
Including variable remuneration, long term bonusses,
stock options, parachutes, etc.
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14. Belgium: imminent act (4)
• Mandatory publications
 On global basis:
- General principles
- Compensation executives (other than CEO)
- Principles & criteria for variable remuneration
- (clawback)
 On individual basis:
- All compensation for non executive directors
- All compensation for CEO
- Stock options
- Indemnities for early termination
o Agreed
o Applied 14

15. Belgium: imminent act (5)
• Parachutes
 > 12 months (or > 18 months in case of a motivated
advice of the remuneration committee)
- Preliminary vote by the ordinary shareholders meeting
- Prior consultation of the works council
• Variable remuneration
 Criteria
- In contract
- Min. 3 year vesting for stock options (exceptions)
- Depend on results in y2 and y3 after grant
 If to independent director (art. 526 :
- Prior approval by the ordinary shareholders meeting
- Prior consultation of the works council
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16. Belgium: CBFA Circular
• CBFA circular 26 November 2009 (n° 34)
 Scope: financial institutions
 Goal: provide financial institutions with principles on a
sound remuneration policy for “important persons”
 Principles
- Variable remuneration capped and performance linked
- Minimum deferment period of variable remuneration (partially)
- Results of individual & company, cost of capital, liquidity, LT vs. ST
- Independent remuneration committee (recommended)
- Communication to shareholders
 Follow-up
- March 15, 2010: remuneration policy should be
communicated to the CBFA
- June 30, 2010: remuneration principles should be applied
 Supervision
- Qualitative and quantitative measures
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17. Conclusion
• Transparency
• Quid privacy protection
• New « functions » - liability ?
« andere leiders » - draft act
« personen met sleutelfuncties » Circular CBFA
Advice « Raad van State »
• Freedom of contract ?
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