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- 17 Feb 2009
The Danish Parliament recently adopted the Danish Act on State Capital Injections into Credit Institutions (the bank rescue package). The Act will put a curb on executive pay in credit institutions.
The Danish Parliament recently adopted the Danish Act on State Capital Injections into Credit Institutions (the bank rescue package). The Act will affect executive pay in credit institutions.
Following a speedy passage through the Danish Parliament, the bank rescue package was adopted on 3 February 2009 through the implementation of the Danish Act on State Capital Injections into Credit Institutions (the “Bank Rescue Act”). The Act entered into force on 4 February 2009.
In terms of HR and employment law, the Act will be particularly important in relation to the statutory amendments implemented on the basis of the Danish Bank Rescue Act and the Danish Financial Business Act. The amendments entail a number of restrictions in executive pay in financial institutions.
The key features of the amendments are:
- In the period of capital injection, the credit institution may not implement new stock option plans or similar incentive plans for the executive board or extend or renew existing plans (this feature is an extension of the restrictions introduced already in October 2008 in the Danish Act on Financial Stability)
- In the same period, the variable elements of executive pay may not exceed 20% of the total basic salary (including pension)
- Also, a general requirement is introduced by virtue of the Danish Act on Financial Stability that the variable elements of executive pay in financial institutions may not exceed 50% of the total basic salary (including pension)
- The deductibility of executive pay from the taxable income of the credit institution is reduced to 50%
In addition, various supplementary requirements for increased oversight and transparency have been introduced in relation to executive pay in order to enable the general meeting and the committee of shareholders of financial institutions to discuss their executives’ pay.
The legal framework also includes specific confidentiality provisions based on ss 152 - 152 e of the Danish Criminal Code. The duty of confidentiality extends to all persons involved in the examination of applications under the Danish Bank Rescue Act.