Legal Aspects of Executive Remuneration in Polish Listed Companies
[in:] Ch. Van der Elst (ed.), Executive Directors’ Compensation in Comparative Corporate Perspective, Kluwer Law International 2015, at p. 299-324
26 Pages Posted: 9 Dec 2017
Date Written: 2015
The issue of remuneration of company officers is of highest importance in modern corporate governance debate. The directors not only are corporate stakeholders themselves, but also predominantly serve as agents in the contractual relationship managing wealth entrusted to them by shareholders and bearing responsibility for proper execution of duties under the contractual nexus. This dual role triggers certain conflicts of interest. Rules and standards, in both legislation and self-regulation (soft-law) regarding corporate governance, on both European and national levels, are in many ways focused on mitigating these agency problems, and therefore preventing company officers from abusing their powers and receiving benefits to the detriment of the shareholders. Remuneration is one of the obvious areas where such abuse may occur. Setting proper managerial incentives that would include both the basic remuneration and a bonus (either in cash, stock, stock options or other) is, therefore, considered to be one of the most important current issues, regarding the proper functioning of companies.
Our paper (written as a book chapter for an edited volume) provides a legal and factual (empirical) analysis of the executive remuneration in Poland. Even though the issues regarding executive compensation are among the most important ones in the contemporary corporate governance debate, Polish regulations are rudimentary, and remain behind the current developments at the EU and international level. Still, the Polish Code of Commercial Companies and other legal acts do provide some basic framework for executive compensation – such as default rules on management pay whereby it is to be set by the supervisory board. Furthermore, the Code contains rules allowing for the authorization of the supervisory board by the shareholders’ general meeting to establish an additional remuneration package based on a profit-sharing scheme. Other than that, there is no shareholder ‘say on pay’-rule in Poland. Special rules applicable to State Owned Companies set a compensation cap. Listed companies must disclose in their annual reports the amount of remuneration and bonuses.
Empirical evidence reveals, stock-based remuneration plans may be found in a significant number of companies listed on the Warsaw Stock Exchange, but as yet they are not commonplace in Poland. There is no single scheme used by the companies, instead there is a variety of legal instruments enabling the implementation of such incentive plans.
Keywords: directors’ remuneration, executive compensation, say on pay, stock options, corporate governance, Polish company law
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