Updated guidelines on remuneration policies and remuneration reports for listed companies
In cooperation with the Committee on Corporate Governance in Denmark, the Danish Business Authority has prepared version 2.0 of the guidelines on the requirements of the Danish Companies Act for remuneration policies and remuneration reports for listed companies published on 27 November 2019. The updated guidelines were published on 27 November 2020 and specify a number of issues, in particular in relation to the requirements for the remuneration report.
The updated guidelines specify a number of issues in relation to the requirements for the remuneration report which Plesner and a number of listed companies discussed in the autumn - most recently at our round-table meetings immediately before the publication of the updated guidelines. The updated guidelines are very useful to the listed companies which are in the process of preparing the remuneration report for the financial year 2020 according to the new rules.
Version 2.0 of the guidelines includes several important specifications regarding the remuneration report, which are reviewed below, and only a few specifications in terms of the requirements for the remuneration policy.
The auditor’s report concerning the annual report (section 7.0 of the guidelines)It is specified that the Danish Companies Act does not include a requirement as to how the auditor is to ensure that the information in section 139b(3) of the Danish Companies Act is included in the remuneration report. If the auditor establishes that the statutory disclosures appear from the remuneration report, the auditor can prepare a positive report to that effect, if it has been agreed with the company’s management. This report can be prepared pursuant to ISAE 3000, Assurance engagements other than audits or reviews of historical financial information. If the auditor establishes that the statutory disclosures do not appear from the remuneration report, the auditor is to submit a separate report to that effect for the general meeting, unless the issue is mentioned in the auditor's report included in the annual report which is approved at the annual general meeting.
Statement of share-based remuneration (section 7.1 of the guidelines)
It is specified that the Danish Business Authority recommends stating the value of share-based remuneration in accordance with the principles for statement of the current value in IFRS 2 for the total remuneration received. It is further specified that the remuneration for the financial year as stated in the remuneration report generally differs from the accounting cost which is stated and accrued according to IFRS 2 over the vesting period in the annual report.
The description of claw back (section 7.1 of the guidelines)
It is specified that there is no requirement to disclose the reasons for claw back of variable remuneration during the financial year. In version 1.0, it was stated that the company should disclose the reasons for claw back, and it was stated to be a requirement that specific details and circumstances for the claw back were to be disclosed. The latter requirement is not included in version 2.0.
Comparative figures (section 7.2 of the guidelines)
In version 1.0, it was stated that companies only have to provide information on (i) the annual change in the remuneration of each member of management, (ii) the profit or loss of the company, and (iii) the average remuneration based on full-time equivalents (FTE) for the most recent financial year. It is specified that it is a requirement that the remuneration report for the financial year 2020 includes comparative information for one year, ie the annual changes in (i)-(iii) for the annual year 2019 until the financial year 2020.
It is further specified that the remuneration report must provide comparative information for the reported financial year as well as the five previous financial years, ie comparative figures for a total of six reporting years over time. This is a change compared to version 1.0 in which it was stated that there was a requirement for comparative information over a five-year period. The text of this provision will be specified at the earliest opportunity.
Information about deviations from the remuneration policy (section 8 of the guidelines)
It is specified that information about deviations from the remuneration policy are only to be provided if deviations have occurred during the financial year.
The guidelines apply from the time of publication. Plesner will prepare an English translation of the updated guidelines which can be obtained by contacting Henriette Stakemann, Lars Bunch or Maja Dahl-Jessen.