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ARTICLE · 30 NOVEMBER 2010

New Developments in Management Board Compensation

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On August 5, 2009, the German Act on the Appropriateness of Management Board Compensation (Gesetz zur Angemessenheit der Vorstandsvergütung; "VorstAG") became effective.

GermanyCorporate/Commercial Law
Ralf Ek
Ralf Ek
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GERMAN M&A AND PRIVATE EQUITY NEWS - 4TH QUARTER 2010

On August 5, 2009, the German Act on the Appropriateness of Management Board Compensation (Gesetz zur Angemessenheit der Vorstandsvergütung; "VorstAG") became effective. This legislative amendment has had such a major impact that most stock corporations are currently reviewing their compensation systems. A mandatory adjustment obligation exists in case new employment contracts for management board members are concluded. Moreover, listed stock corporations must consider the recommendations of the German Corporate Governance Code, particularly with a view to caps on severance pay. In addition, in the future, a deductible in the D&O insurance will generally become mandatory for management board members. The following is an overview of the consequences that the VorstAG has had on management board compensation.

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