How are managers typically compensated?

Corporate Governance

Austria Small Flag Austria

In general, members of the management board of private and public companies receive a salary that includes fixed and variable performance-linked components. In addition to these basic components, applicable laws also include other types of pecuniary benefits, i.e. profit participations, expense allowances, insurance payments, commissions, incentive-related remuneration commitments and fringe benefits of any kind, under the term "compensation".

When determining the aggregate amount of the compensation payable to a member of the management board, the supervisory board must ensure that the compensation bears a reasonable relationship to the duties and performance of such member of the management board and to the financial situation of the company, and that it creates long-term incentives for a sustainable corporate development. Variable remuneration components shall be linked, above all, to sustainable, long-term and multi-year performance criteria. Performance criteria shall also include non-financial criteria and shall not entice the members of the management board to take unreasonable risks.

With respect to public companies, the Corporate Governance Code, and with respect to credit institutions, applicable laws and regulations, provide for detailed regimes regulating the various components of the remuneration and the conditions for the pay out of the variable remuneration, e.g. deferral periods resp. vesting periods applicable to financial instruments granted.

Brazil Small Flag Brazil

As already mentioned, typically Brazilian companies are managed by an executive office team. The executive office team shall be composed of at least two officers. The officers of Brazilian listed companies may be elected and removed at any time by the board of directors. In relation to the compensation paid to the company’s executive officers, please refer to our comments on item 10 above.

France Small Flag France

Compensation of chief executives, which may include fixed and variable components, is decided as follows:

  • for a DG of a single-tier SA, by the board of directors;
  • for the chair of the managing board (and other managing board members) of a two-tier SA, by the supervisory board;
  • for the manager(s) of an SCA, by the shareholders with the approval of the unlimited-liability shareholders (commandités), or if provided by the bylaws by the unlimited-liability shareholders alone;
  • for the president of an SAS, as provided in the bylaws (for example, by the shareholders or by a specific shareholder);
  • for the manager of an SARL, as provided in the bylaws.
    If the board has a compensation committee the board will take into account the committee’s recommendations.

Publicly traded companies are subject to “say on pay” rules requiring the compensation package of top management (DGs and board chair or members of the management board of an SA or managers of an SCA) to be approved by the shareholders in advance (ex ante) and, with respect to variable or exceptional elements, prior to pay-out (ex post). The proposed Loi PACTE would authorise the government to adopt legislation tightening the procedures applicable to shareholder approval (including approval and implementation of the management compensation package).

Germany Small Flag Germany

Under the German Stock Corporation Law, remuneration must be adequate in relation to the management board members' duties and responsibilities, their performance and the economic situation of the company; it should not exceed the customary remuneration that is granted at comparable companies without good reason.

For financial institutions, a specific regulatory regime (AIFMD and Capital Requirements Directive IV) governs the rules of management compensation.

The amended European Shareholder Rights Directive of 17 May 2017 stipulates that the companies have to establish a remuneration policy concerning its directors and that shareholders have the right to vote on the remuneration policy at shareholder meeting.
A clear and understandable remuneration report must be presented. The remuneration policy as well as the remuneration report has to be published on the website of the company. Member States may provide (as done in Germany) for the shareholder vote at the shareholder meeting to be only non-binding. However, a shareholder vote rejecting the policy triggers an obligation to amend the remuneration policy and to present it again at next year's shareholder meeting.

Management Board members typically receive a mix of fixed remuneration, (short term) variable remuneration and long term incentive plans (LTI). According to the "CEO pay landscape in Europe's Top 100 companies", German CEOs receive the third highest remuneration in Europe. In contrast to most other European countries, in Germany, LTI plans are in many cases "Long Term Cash" plans or Performance Share Plans, which are usually settled in cash.

Greece Small Flag Greece

Members of the Board may be compensated on the basis of their office (for more details on this please refer to our answer of question No.10 above), although this is not mandatory. Managers and members of the Board may also have an employment agreement (or similar arrangement) with the company.

Hong Kong Small Flag Hong Kong

This varies from one company to another but managers are typically compensated by salary, bonus and even stock options. For listed companies, the remuneration policy and proposals of management is usually reviewed and approved by the remuneration committee of the board with reference to corporate goals and objectives. The remuneration committee would also make recommendations to the board on the remuneration packages. Similar to directors, chief executive of listed companies may be granted options of new shares and new securities as non-monetary compensation upon obtaining shareholders’ approval and satisfying certain conditions under the Listing Rules (rules 17.03, 17.04(1) of the Main Board Listing Rules; rules 23.03, 23.04(1) of the GEM Listing Rules).

Japan Small Flag Japan

In Japan, directors (in the case of a company with statutory auditors or a company with an audit and supervisory committee) or executive officers (in the case of a company with three committees) generally serve as managers of the company. For details of their compensation, please see question 10.

Portugal Small Flag Portugal

Members of the governing bodies usually receive a fixed remuneration (variable remuneration is not legally permitted for the supervisory body’s members and is not recommended for non-executive directors under the IPCG Code). The executive directors of stock companies may be entitled to receive variable compensation subject to each company’s compensation policy (which may be a part of its annual profits and in cash or securities).

The compensation policy of public-interest entities is subject to annual say-on-pay by shareholders and disclosure requirements.

The remuneration policy of listed companies (under the IPCG Code) and of certain regulated companies, such as credit institutions (under mandatory rules), are subject to additional constraints, such as on performance criteria, caps and deferral and claw-back mechanisms.

South Korea Small Flag South Korea

There are no specific regulations governing the remuneration of managers under the KCC, but the general view is that such remuneration should be decided by the BOD. The aggregate ceiling of remuneration of officers who are directors must be either set forth in the AOI or decided pursuant to a shareholders’ resolution. For remuneration of non-director officers, there is no legal requirement for shareholders’ approval. For a Company to treat management compensation as expenses for tax purposes, the remuneration of officers should generally be paid in accordance with the standards set forth in the AOI or as approved by the BOD. Otherwise, it is more likely that such remuneration will not be acknowledged as expenses by the tax authorities.

Switzerland Small Flag Switzerland

Although the compensation systems of Swiss listed companies vary significantly, the compensation usually consists of fixed (base salary, normally paid in cash) as well as variable remuneration. The latter typically comprises a short-term and a long-term component. The short-term variable remuneration depends on past performance and is usually paid as an annual cash bonus or in blocked shares. The remuneration granted under long-term incentive plans in most cases consists of equity awards (such as performance share units) which are subject to multi-year vesting periods.

Members of executive management are subject to the compensation rules of the OaEC, see question 10.

United States Small Flag United States

The management team or officers of both corporations and LLCs are typically compensated with a mix of three different types of compensation: base salary, bonuses and equity awards.

Members of management usually receive a fixed, annual salary for their efforts on behalf of the company. In smaller corporations and LLCs, this method is the most common as it does not dilute or weaken the equity ownership of the original owners or ownership group. In addition to the annual salary, members of management are often granted bonuses at the end of the company’s fiscal or calendar year. Bonuses can be subject to the board’s discretion or based on specific, clearly defined targets. Bonuses may be paid in cash, equity or a combination of the two.

Equity compensation may include, among other items, stock options, restricted stock awards, restricted stock units or stock appreciation rights. Equity awards can be short-term or long-term and typically incentivize management to maximize share (or, in the case of LLCs, membership interest) value. Stock options and stock appreciation rights are viewed as further incentivizing value expansion and shareholder maximization since these awards usually correspond directly to the growth of equity value. Finally, restricted stock awards and restricted stock units grant stock to a member of management upon completion of certain benchmarks such as continued employment with the company or achievement specified performance goals.

United Kingdom Small Flag United Kingdom

Compensation for executives of listed companies tends to be a mix of base salary, cash bonus (part of which is typically deferred), and equity incentives. For premium listed companies, pay for executive directors, the chair and senior employees should be set by the remuneration committee. Where equity awards form part of remuneration, such awards should be designed to align the incentives of senior management with those of the long-term interests of the company.

Canada Small Flag Canada

Remuneration of senior management is determined by the board of directors or a committee thereof, while the compensation of non-senior members of management may be determined by senior management. In accordance with securities law, public companies are required to disclose the processes by which compensation for the management is determined. Such compensation typically includes salary and bonus, and may include stock options and/or other share-based compensation, a pension, benefits and perquisites.

Italy Small Flag Italy

Managers may be compensated in a variety of ways, ranging from a fixed annual remuneration plus bonus (if any), to stock option plans and stock grants.

Managers are employees (dipendenti) of the company, therefore the mandatory employment and social security laws and regulations should be carefully accounted for in determining their compensation.

With regard to variable remuneration, specific provisions apply to banks and financial institutions.

Turkey Small Flag Turkey

There is not any provision in TCC directly regulating the compensation of the managers. It is stipulated in TCC that the annual activity report of the BoD shall include the premiums, bonuses, allowances, travel, accommodation and representation expenses, in-kind and in-cash opportunities, insurances and similar guarantees paid to the BoD members and senior executives (TCC, article 516/2).

In accordance with CGP, basis of remuneration for the members having the administrative responsibility must be in written and presented to the attention of the shareholders as a separate matter in GA’s agenda for the shareholders to share their opinions on it. The remuneration policy prepared for this purpose shall be included on the company's corporate website (CGP, article 4.6.2). The remuneration paid and also the other advantages granted for the board members and the members having the administrative responsibility shall be announced to the public by annual activity report (CGP, article 4.6.5).

Luxembourg Small Flag Luxembourg

Compensation of the members of the daily management of the company is entirely left up to the board. If the daily manager is however one of the board members of the company, the board is obliged to annually report on his remuneration and other expenses.

For qualifying listed companies, the LSE Principles further indicate in the same manner as for the board members, that the remuneration must reflect the level of quality and skills required of members of the executive management and that the remuneration must be structured in such a way as to protect the company against taking excessive risks. Furthermore, the criteria for as well as the various factors entering directly or indirectly into the remuneration in favour of members of the executive management shall be subject to the approval of the annual general meeting of shareholders.

Ukraine Small Flag Ukraine

For the purpose of this section, the term “management” shall comprise all members of the executive board and/or the company`s CEO.

In JSCs, a supervisory board adopts regulations on remuneration of executive board members using the Commission`s guidelines. The supervisory board also approves the terms and conditions of employment contracts with every member of the executive board.

Executives in big JSCs usually have fixed and variable elements in their compensation. Variable bonuses usually depend on the financial results of the company. Although such bonuses are generally paid in money, the Commission in its recent regulation allowed their payment in share options.

In small and medium LLCs, the management usually receives standard fixed salaries with possible financial bonuses at the end of the year.

Australia Small Flag Australia

Managers, or executives, are employees of the company and are compensated in accordance with the terms of their employment agreements. The salaries and bonuses of the senior management team is determined by the board of directors, unless delegated to a remuneration committee.

Egypt Small Flag Egypt

The management of a company is usually compensated in accordance with the compensation and remuneration scheme of each company; salary and applicable allowances according to the management level. However, in accordance to the provisions of the Companies Law, the profit share of the employees shall be 10% of the annual net profits of the company; such distributions shall not exceed the aggregate annual salary.

Updated: September 18, 2019