Executive Remuneration of Company Directors under EU Law and Turkish Law

The criteria to determine the material scope of executive pay has always been a controversial aspect of corporate law and corporate governance. The controversy stems from the fact that the board of directors generally tends to determine a suitable executive remuneration for its members, not considering the interests of other stakeholders. In some cases, an independent compensation/remuneration committee is appointed by the board of directors and determines the amount of executive pay. Depending on the legislation, this may require additional approval at the annual general meeting by the shareholders. European legislators have differing approaches with regards to regulating this very area of corporate pay. The revised Shareholders Rights Directive requires an enhanced approach for the shareholders’ role by determining the remuneration policy of the company. These amendments can be identified as the promotion of the say on pay, on the remuneration policy, and remuneration report. Furthermore, the previous recommendations have also set the criteria to determine the amount of remuneration. The Directive contains provisions for setting up a clear and transparent corporate remuneration policy and shareholders’ binding vote with temporary derogations. The corporate remuneration system of Turkish law is legislated under Art. 394 TCC (Turkish Commercial Code Nr. 6102), which only requires that board members can be paid an honorarium, salary, bonus, premium, and a portion of the annual profit, provided that this amount is determined by the articles of association, or by way of a general meeting resolution. Art. 408 TCC also stipulates a binding general meeting approval of the remuneration policy, whereas Art. 513 TCC requires the framework with regard to bankruptcy procedures.