The Second Stability Act 2012 amends the Stock Corporation Act and the Commercial Code. The changes entered into force on July 1 2012. The most important amendments are as follows.
According to the previous version of Article 78(1) of the Stock Corporation Act, the supervisory board had to ensure that the total benefits provided to members of the management board were proportionate to the tasks of individual management board members and the company's situation. The new law introduces further criteria for the appropriateness of managing directors' remuneration, stating that:
- the performance of the managing directors must also be taken into account;
- the supervisory board must look at the common practice in comparable companies, as well as the pay structure in the company itself; and
- it is the supervisory board's duty to incentivise the managing directors to foster the long-term wellbeing of the firm.
The remuneration of each member of the management board, as well as the remuneration policy, must be featured in the company's corporate governance report.
The new law introduces a cooling-off period for the management board members of listed companies. Former members of a listed company's management board must wait for two years after their departure from the management board before they can be elected as members of the company's supervisory board. However, this rule does not apply if they are nominated by shareholders holding more than 25% of the voting rights. The supervisory board may have only one member whose cooling-off period has not yet expired. The cooling-off period is mandatory for the supervisory board's chairperson.
The amendments also address the composition of the supervisory board. According to the new law, shareholders must pay attention to the professional and personal qualifications of the members of the supervisory board. The supervisory board should be well balanced with regard to the professions of its members and diversified in terms of its members' gender and age. For listed companies, the nationalities of the members of the supervisory board must also be taken into consideration. Finally, persons who have been convicted for criminal offences that call into question their professional trustworthiness cannot be elected.
For further information on this topic please contact Stephan Frotz or Paul Schörghofer at Schoenherr by telephone (+43 1 534 370), fax (+43 1 534 376 100) or email (email@example.com or firstname.lastname@example.org).
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.