May 22, 2022

towards conditional bonuses –

Within two weeks, the European Commission should adopt a text on the sustainable governance of companies, ie their consideration of the environmental and human impact of their decisions. This text should in particular include an update of the obligations and duties of managers.

Among the obligations, a novelty could well concern executive directors: it is the integration of a clause requiring that the variable part of their remuneration be backed by sustainability objectives.

Bonuses would therefore no longer be linked solely to the company’s financial performance. “If we want to align the economic and the environmental, it absolutely has to be seen in the bonus” says Pascal Canfin, chairman of the European Parliament’s Environment Committee, which is working to include this clause in the Commission’s text.

“With regard to due diligence, an EU study on this topic revealed that only one in three large companies claim to carry out due diligence, taking into account all human rights and environmental impacts “ reported, in March 2021, the CEC European Managers, an organization representing European managers. The organization claimed at the time that it « [réjouir] of the EU’s new sustainable corporate governance initiative.

« QWhen we talk about corporate governance, we can clearly see that short-term economic interests always direct the action of company managers who are under pressure, for example, from their shareholders,” deplored, for her part, the MEP Marie Toussaint, in May 2022 on Euronews. “Well, if we put in place criminal rules, shareholders will no longer have the means to put pressure on the leaders of Total, Esso and Shell to continue to exploit fossil fuels so as to danger the living she then took as an example.

10 to 20% of the bonus concerned

If adopted, the Commission’s text will“align the short term and the long term” believes Pascal Canfin, namely financial benefits and the creation of value linked to the challenges of sustainable development.

Discussions are currently taking place to clarify, in particular, whether the bonus clause should only concern large groups and whether it is indeed the role of the EU to define such a framework.

On this second point, Pascal Canfin believes that the autonomy of companies will be well preserved. Indeed, they will remain free to set the amount of the variable portion based on environmental and social criteria, as well as the choice of these criteria, which may range from the reduction of plastic packaging to the protection of biodiversity.

A hundred European companies would already have part of their bonus (10 to 20%, even 30% in rare cases) backed by environmental and social criteria, according to Pascal Canfin.

Now, “if we don’t move to an obligation (…), we will not have made a transformation on the scale necessary to succeed and align interests with the Green Deal” considers the chairman of the Parliament’s Environment Committee.

A few more days to wait to consider this change of scale, the presentation of the text by the European Commission being expected on February 15th.

For a sustainable and impactful commercial policy in our daily lives

MEPs who are members of the Parliament’s working group on fair trade call on the Commission and the Council to walk the talk on trade policy. They propose a series of concrete measures aimed at making it truly sustainable and fair.