Government obliges companies to involve works councils in executive pay

Large companies with 50 or more employees will soon be obliged to disclose what their senior managers earn relative to ordinary employees. They will be required to inform their works councils of the ratio of management salaries to those of ordinary employees.

A new law will be introduced to increase transparency and encourage discussion of the imbalances in some companies. The law was proposed by Lodewijk Asscher, the Minister of Social Affairs and Employment, and has been approved by the cabinet.

The salaries of some executives have increased sharply during the economic crisis whereas those of ordinary employees have not. The government does not decide on executive pay in private companies but it wants to curb excesses by giving works councils a greater say.

The government expects the European Commission to present a proposal to make remuneration policies and executive pay more transparent in the near future.