Executive Pay and Loyalty
International News re Executive Comp. and Employee Benefits
(updated 15.Dec.2013)

Cross-border HR and Benefits:

  • 2012.Mar.10  Japanese Parent Reached by U.S. ERISA Pension Claim (Extra-U.S. Jurisdiction).  Another reminder about the potentially global reach of ERISA's controlled group liability rules for underfunded US pension plans. Caution is warranted because the Pension Benefit Guaranty Corporation (PBGC), which insures US pension plans, is aggressively pursuing ERISA claims against non-US companies even if they have remote or tangential U.S. contacts.  In Asahi, ... see Cross-Border Issues.
  • 2012.Jun.13  Say on Pay -- still voluntary in Canada, with average shareholder approval votes above 90% but with one failed vote this year and a few others below the 70% level that triggers ISS concern and deeper scrutiny. See The State of Say on Pay in Canada.  
  • 2012.Feb.20  More Favorable Equity Award Rules for Multi-National Employers.  The State Administration of Foreign Exchange (SAFE) has replaced Circular 78 (issued April 2007) with Circular 7 for the purpose of expediting the process by which multi-national employers may issue equity awards in China.  A common alternative remains viable: cash-settled awards between a PRC employer and PRC employees remain outside SAFE concerns, even if the awards relate to the equity of the multi-national parent company.  Note that "phantom stock" awards of this kind require regular expense recognition for accounting purposes, which is the most common concern with their usage.
  • 2011.Nov.18  "Executive Pay in China More Globally Competitive" (Executive Search Blog), stating that --
    • "In a recent BlueSteps study of over 100 senior executives working in China, seventy percent stated that executive pay had become more competitive over the last 5 years, and 89% indicated their intent to stay in China for over 3 years."
    • "The majority of respondents were expats working in China (77%), in general management roles including CEO/COO (63.4%), earning over USD $150k (74%).


  • 2011.Oct.12  Dismissal for Breach of Loyalty. The French Supreme Court has ruled that, in the case of an employee on sick leave who was caught working at his wife's market stand, the employer must nevertheless prove that the employee's activity while on leave was detrimental to the company in order for the company to validly dismiss the employee for breach of the duty of loyalty. Cass. Soc. 12 October 2011, No. 10-16649.


  • 2012.Feb.7  Italy's Supreme Court Denies Worker Guarantees to Bank Executive who Breached Fiduciary Duties.  Here is interesting info from LinkedIn's international employment group re an Italian Sup. Ct. decision to the effect that, if an employer follows proper dismissal procedures, an employee may be denied -- quoting from R. Ferrario's blog post -- "guarantees under the Workers' Statute" if the employee "seriously breaches his employment contract in a way that permanently jeopardises the fiduciary relationship with the employer."

  • 2012.Mar.9  Spain limits executive pay state-owned companies and rescued banks
    Spain to limit executive pay at state-owned companies” -- quoting from the Guardian (2/17/2012), further reporting that “Rajoy's government estimates salary cuts of up to 35% (…) in the third of a series of measures designed to assuage anger over tax-funded executive pay”. Annual base salaries at state-owned firms would be limited to €105,000 although the government may approve performance bonuses. The Spanish government had already decided to cut salaries of banks (see art. from the Guardian dated 2/10/2012) with upper limit for nationalised or part-nationalised banks set at €300,000 and non-executive directors of such banks capped at €50,000. Former General Manager of the IMF Rodrigo Rato has also recently agreed to have his executive chairman's salary at the Bankia group reduced by 75% down to €600,000 as the government also decided to cut bankers’ pay at rescued banks.
      >>> For follow-up, feel welcome to contact Jeremie Gicquel who provided this information.) 

  • 2012.May.14  Former Dresdner Bankers Win Court Battle Over Unpaid Bonuses. Commerzbank must pay bankers €50m in bonuses dating back to credit crunch” -- quoting from the Guardian (9.May.2012), further reporting that Bonuses for 2008 at City subsidiary Dresdner Kleinwort were guaranteed, high court rules, even though parent company lost €6bn that year in the depths of the financial crisis. The dispute with Germany's Commerzbank, which took over Dresdner, involves some former investment bankers seeking more than €1m each. During the three weeks of hearings, the CEO of Commerzbank had argued that there was a difference between a promise and a contractual agreement. Plaintiffs had been verbally promised the bonuses by their employer in 2008, but the German high court ruled that this verbal promise constituted a binding contract. >>> Contributed by Jeremie Gicquel, Paul Hastings Paris.
  • 2012.Apr.27  Binding Say on Pay? Yea for Transparency, Nay for Shareholder Approval   
    Today, a UK-USA team of Paul Hastings LLP attorneys filed comments in response to the UK government's binding say on pay proposal.  While generally supporting transparency in the disclosure of executive remuneration, the comment letter opposed binding say on pay (BSOP) generally, and proposed two dramatic refinements to the UK governments proposal in the event BSOP moves forward nevertheless; namely (1) the BSOP vote requirement should not be imposed on all UK-quoted companies, but should instead should only apply to those that receive sub-standard shareholder advisory votes in more than one year; and (2) when recruiting new talent, boards should not be constrained by the most-recently approved remuneration policy, as the UK consultation draft suggests. For a copy of the Paul Hastings comment letter, just email Mark.  More at Binding Say on Pay.

  • 2012.Feb.24  "Say on Pay Votes and CEO Compensation: Evidence from the UK" (Ferri and Maber, Review of Finance,pending). "Overall, our tests suggest that UK investors perceived say on pay to be a value enhancing monitoring mechanism, and were successful in using say on pay votes to pressure firms to remove controversial pay practices and increase the sensitivity of pay to poor performance."
  • 2012.Jan.8  "Cameron promises powers to limit executives' pay" (BBC News). The BBC reports that "David Cameron has promised shareholders a binding vote on executive pay, in an effort to deal with excessive salaries," and that he "also pledged to tackle large payouts for executives dismissed because of poor performance."

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Global Banking (other than U.S. Banking):


2012.Mar.7  Another Claw-back via Hold-back ... Lloyds Bank. Lloyds bank claws back £1.5m bonuses from directors” -- quoting from the Guardian (2/20/2012), further reporting that “Lloyds Banking Group is to claw back at least £1.5m from five former and current executives and eight other senior managers, to penalise them for £3.2bn of losses the bailed-out bank incurred after the bonuses were awarded”. It is the first time that a large UK bank has reclaimed executive bonuses, though mostly in the form of hold-backs, as UBS has done (see the 2012.Feb.9 entry below).  All of this suggests banks, and other employers, are likely to pursue better governance and risk management through the increased use of multi-year vesting schedules that basically establish performance-based or discretionary forfeiture risks.  >>> For follow-up, feel welcome to contact Jeremie Gicquel who provided this information.) 

2012.Feb.9  Banks Defer 2012 Bonuses and Claw-back 2011 Share Bonuses. Per Reuters, Deutsche Bank will defer any part of an employee's bonus above 200,000 euros ("the deferred portion will also be half cash and half shares, and will be paid out over a period of three years in equal annual installments, beginning in 2013"). Separately, UBS has notified some of its highest-paid investment bankers that they will forfeit the maximum amount (50%) of share bonuses that were awarded in 2011 and that were scheduled to vest in 2012 (in the first of three vesting installments).  See Wall Street Journal

The foregoing is consistent with Lucian Bebchuk's Harvard Law blog under the title "Executive Pay and the Financial Crisis" where he advises: "Going forward, these two problems can and should be addressed by improved design of pay arrangements.To address the first problem, pay arrangements should generally tie executives’ payoffs to long-term results (along the lines proposed in Bebchuk and Fried (2010) or otherwise). To address the second problem, executives’ payoffs should be tied not only to long-term results for shareholders but also (as Bebchuk and Spamann (2010) advocate) to long-term results for other contributors of capital to their financial firm."

2012.Jan.23  "Credit Suisse Again Bundles Risk and Reward"  Credit Suisse plans to pay a portion of senior employees' bonuses in bonds backed by derivatives, reviving a maneuver from 2008 that helped the firm dispose of risky assets while preserving value for staff" so starts the following Bloomberg article.