Big news out of Europe today (besides fears of a Greek exit from the Euro returning like a slasher flick monster that just won’t die): Michel Barnier, the EU’s top financial services regulator, is pushing for binding Say-on-Pay. Barnier wants to give shareholders the power to curb “morally indefensible” pay. This change would impact publicly traded companies that list their shares on European exchanges, including London. In addition, European banks will need to disclose the top 20-30 earners, and their shareholders will be able to set caps on bonus levels.
Regardless of the wisdom of making corporate managers more accountable to shareholders – remember that golden parachutes and aggressively leveraged corporations were (and still are) justified as ways of reducing agency costs, and that diversified shareholders tend to be more risk preferring and short-term focused than managers* – this will be good news for US IPO markets. The JOBS Act’s “IPO On-Ramp” provisions for Emerging Growth Companies already had some betting on more European IPOs on this side of the pond. Barnier’s proposals will make some European companies decisions that much easier.
*It’s a f’ing stupid idea. Just look at Say-on-Pay in the States over the last two years: almost every companies that received “no” votes had one thing in common: terrible performance numbers for the past year. Say-on-Pay exacerbates short-termerism, and being overly obsessed about today at the expense of tomorrow is no way to run a company. Hell, it’s no way to do anything (other than drink heavily).