In post No. 26 I reported about an inquiry by a large Dutch newspaper (de Volkskrant) into compensation of so-called 'top-directors' over 2008. The outcome was that director compensation tanked with 21% to an average of € 3 million, mainly due to dropping bonuses (32% to an average of € 813.000) and share/option related profits (29% to € 969.000).
A new inquiry by the same newspaper into golden handshakes over 2008 has revealed that, to Dutch standards, banks have not really been reluctant in paying handsome amounts to managers leaving the company. According to the newspaper, 15 managers of six banks were paid a total of € 32 million in 2008, ABN Amro being the best paying bank: € 19.9 million, of which € 8.2 million was paid to one manager (which resulted in litigation, 'won' by the manager). In 2007, Dutch banks only paid € 6 million in exit bonuses. 150 other large Dutch companies paid a total of € 18 million in golden handshakes.
So while the number of regular bonuses went down in 2008, the amount of exit bonuses went up. How does this relate to the Dutch corporate governance code, pursuant to which the exit bonus should not exceed one year's salary?
As stated in principle II.2: The amount of compensation which a management board member may receive on termination of his employment may not exceed one year's salary, unless this would be manifestly unreasonable in the circumstances.
Many companies do not apply this pay cap, apparently because the contract between the company and the manager provides for a different regime - resulting in higher amounts - and the contract has not been redrafted to be in line with the code.
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