Page 177 - Albanian law on entrepreuners and companies - text with with commentary

(3) In case the company’s financial standing is seriously deteriorating, the benefits
granted as of the Second paragraph may be adequately reduced if so determined by the
General Meeting.
(4) The scheme for benefits referred to in paragraph 1, the individual benefits
attributed to each non-managing board member and the Managing Director as well as
the annual impact of the incentive schemes on the company’s assets shall be disclosed
together with the annual financial statement as provided for in first paragraph 1, e) of
Article 154.

Comments:

1. (Managing) Directors’ salaries have been the centre of many corporate scandals in
recent years. The attitude of many managers to use their position for pay rises even when the
company is in financial trouble has been an often-debated issue and managers’ public
reputations have suffered in response. The majority of cases in question regarded the
management of JSC listed in the stock exchange (public companies as of Article 108
Securities Law). EU law-makers reacted to this trend with EU Commission’s
Recommendation 2004/913/EC. The Recommendation is intended to “foster an appropriate
regime for the remuneration of directors of listed companies”. 158 However, the scope of this
controversial debate is much larger and covers all company structures where management
may gain notable autonomy from other company organs supposed to supervise and control
them. The more the duties of (Managing) Directors replace the safeguard mechanisms
connected to capital maintenance regimes, the more the introduction of an adequate
management remuneration system linked to the performance of the company becomes an
important additional corporate governance instrument.

2. The Recommendations do not aim at the establishment of standards for appropriate
salaries—this would be difficult to achieve for the huge variety of company contexts.
However, it introduces the participation of the General Meeting in the standard setting
process. The Board of Directors prepares the scheme of benefits granted to (Managing)
Directors (remuneration or incentives including a share in the company’s profit and share
options), and this scheme of benefits must be approved by decision of the General Meeting,
Article 160 (1). Individual benefits are likewise established by the Board and must adequately
reflect the duties of non-managing Board members and the Managing Directors with respect
to the scheme of benefits to the financial situation of the company, Article 160 (2). In case the
company’s financial standing is seriously deteriorating, the benefits granted may be
adequately reduced if so determined by the General Meeting, Article 160 (3). The scheme for
benefits, the individual benefits attributed to each Managing Director as well as the annual
impact of the incentive scheme on the company’s cost structure shall be disclosed together
with the annual financial statement, Article 160 (4).

158 See the Albanian Corporate Governance, especially Principles 5.
176