ANALYSIS
Macedonian Board Earnings Disclosure Requirements Go Too Far
Author : Michelle Osmanli , Executive Director , AmCham Macedonia
In May 2015 , Macedonia ’ s parliament adopted a change to Company Law ( article 384 ) requiring that the annual reports of all public companies now contain details of the global employment- or Board service-related earnings ( salary , other remuneration , bonuses , insurance and other rights ) of the members of their executive & non-executive boards , management boards and supervisory boards . In practice , this means Board members in Macedonian companies will need to essentially publish their personal tax returns or face sanctions .
Transparency of Board member earnings within the company they serve is reasonable and nothing new . Shareholders in a company clearly have a right to know how Board members in that company are compensated . According to the EU Shareholder ’ s Directive ,
Directors ’ remuneration plays a key role in aligning the interests of directors and shareholders and ensuring that the directors act in the best interest of the company . Shareholder control prevents directors from applying remuneration strategies which reward them personally , but that may not contribute to the long-term performance of the company .
To ensure shareholders have access to the information they need , the Directive dictates that they be allowed to review and vote on the company ’ s remuneration policy . The Directive says nothing about the need for shareholders to know anything about income generated by Board members outside their organization . In fact , it appears that Macedonia ’ s new measure may be the most far-reaching disclosure requirement on the European continent and beyond .
This requirement is unreasonable and has no practical shareholder protection purpose . At a minimum , this requirement increases the informational noise of annual reports as well as public companies ’ reporting burden . It may also discourage foreign experts from serving on the managing bodies of companies in Macedonia , thus reducing the country ’ s appeal as an FDI destination . This is because most companies consider compensation and benefits packages as a trade secret , and their disclosure in another company ’ s annual report ( as required by Macedonian law ) could result in negative repercussions for both the individual and the company / group .
Finally , the rule reduces the integrity of companies annual reports , since information provided by foreign , non-Executive Board members on any earnings generated outside the country cannot be verified by local company authorities or shareholders . Yet , the Law requires Executive Board members and shareholders to sign and accept the validity of these data , as with all contents of the annual report , respectively .
For all of these reasons , article 384 should be amended as soon as possible to align it with the EU Shareholder ’ s Directive .
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Spring 2016 Issue 49 21