Understanding Director’s Pay in Europe: A Comparative and Empirical Analysis

This paper analyses the regulatory framework which applies to the determination of directors’remuneration in Europe and examines the extent to which European firms follow best practices incorporate governance in this area, drawing on an empirical analysis of the governance systems thatEuropean firms adopt in setting remuneration and, in particular, on an empirical assessment of theirdiverging approaches to disclosure. These divergences persist despite recent reforms. After anexamination of the link between optimal remuneration, corporate governance and regulation and anassessment of how regulatory reform has evolved in this area, the paper provides an overview ofnational laws and best practice corporate governance recommendations across the Member States,following the adoption of the important EC Recommendations on directors’ remuneration and onthe role of non-executive directors in 2004 and 2005, respectively. This overview is largely basedon the answers to questionnaires sent to legal experts from seventeen European Member States. Thepaper also provides an empirical analysis of governance practices and, in particular, firm disclosureof directors’ remuneration in Europe’s..