A week after the UK announced sweeping proposed changes to executive compensation and governance regulations, additional developments in the EU-at-large as well as in both France and Switzerland have also emerged:    

• European Union Parliament Reaches Deal to Require Say on Pay Vote Once Every Four Years:  According to the Financial Times, a deal has been reached which would give shareholders the right to vote on company pay plans at least once every four years.  The agreement, however, will permit individual nations to opt to have the votes be binding or non-binding in nature.  Interestingly, the report notes that the consequence for failing even the non-binding vote will be to provide a revised policy for vote at the next shareholder meeting.  In addition, companies would be expected, though not required, to "“monitor investee companies on relevant matters including strategy, financial and non-financial performance and risk, capital structure, social and environmental impact and corporate governance.” As of 2014, of the 28 members of the EU, only 13 countries have required say on pay votes and of those 13, three countries hold voluntary votes.  The rules still need to be approved by the European Parliament.  
• France Expected to Toughened Say on Pay Rules:  The French have finalized changes in legislation (Article 161) which now awaits the signature of French President Hollande, which would subject companies to a binding, annual say on pay vote which is forward looking and focuses on compensation policy as well as a backwards looking vote on variable and exceptional pay amounts.  On the occasion that a company fails the forward-looking vote, previously approved pay principles and criteria will continue to apply, or if there was not a previous policy, pay would be determined in the same manner as the previous year.  French listed companies will be required to hold the first forward-looking vote in 2017.  Beginning in 2018, companies must hold the backwards-looking vote which will seek shareholder approval on the variable and "exceptional" payment amounts to executives.  The recourse for failure of this vote is not specified.  
• Swiss Corporate Law Reform Progresses, Includes Pay Restrictions, Gender Quotas:  Since 2013, when Swiss Voters adopted the "Minder Initiative" which sought to reduce executive pay through binding say on pay votes and board elections, the Swiss Federal Council has been working to transform the resulting ordinance into public law.  In late November, the Council published an updated draft of the 2014 proposal implementing the compensation and governance changes, perhaps demonstrating how difficult and rigid the changes are.  According to a report by Swiss law firm, Lenz & Staehelin, the new draft loosened several compensation restrictions and say on pay votes in light of intense opposition to the original draft proposal.  This more comprehensive rule will replace the Minder Initiative's "Compensation Ordinance" which has been in effect since January 1, 2014.  However, a new, final law is not expected before 2018.  Among the requirements in the proposed rule include:
  • Sign-on bonuses are only permissible if a company can demonstrate a "demonstrated financial disadvantage" occurred as a result of the change in employment. 
    
  • Non-compete agreements may only be maintained if they are commercially justified, the consideration is in line with market standards, and the compensation does not exceed the average annual compensation over the past three years, but the maximum duration of 12 months has been eliminated.
  • The 2014 Draft Proposal included a prospective say on pay vote as well as a mandatory maximum ratio between fixed and total compensation (a bonus cap).  The former remains in place, while the bonus cap has been dropped.  The proposal also eliminates most individual pay disclosures for senior executives.  
  • The draft proposal includes a 30% gender target quota for board representation and 20% for the executive committee which must be met during a 5-year transition period for board and 10 for the executive committee.