News 28. 8. 2020

SSH has adopted and addressed to SOEs a new set of recommendations: Recommendations for the adoption of rules on other rights for members of a management body

On 26 August 2020, the SSH Management Board adopted a new set of recommendations for SOEs, i.e., the Recommendations for the adoption of rules on other rights for members of a management body ("the Recommendations").

The Recommendations envisage that a supervisory body of an SOE adopts the Rules on Other Rights according to which other rights shall be determined in agreements concluded with members of management bodies for performing the duty of running a company and organising its operations. Other rights are considered benefits and entitlements of a non-monetary nature (for example, the use of a company car also for private purposes, the use of a company mobile phone also for private purposes, payments for various insurance policies) as well as specific emoluments which are, as a rule, based on the labour law and arise from the Employment Relationships Act (ZDR-1), collective agreements or the employer's general corporate policy (these are, for example: a holiday pay, wage compensation due to various types of absence, the retirement benefit, the reimbursement of expenses incurred in connection with work duties, etc.).

The Recommendations make a stand about the types of other rights and, in certain cases, about the method of their regulation and their highest permissible value which is to be determined in the Rules on Other Rights. The SSH Recommendations on Other Rights should not be automatically transposed to the supervisory body's Rules on Other Rights, neither should such rules be automatically included in agreements regulating the services of members of a management body. The question about which rights and in what amounts shall the Rules on Other Rights incorporate, and consequently, also agreements for regulating the services of members of a management body, is the result of prudent judgement by a supervisory body, each time taking into consideration the relevant circumstances, criteria and the company's interests. It has to be especially pointed out that the Recommendations represent an external framework which is set in a relatively broad manner in order to cover various relevant circumstances encountered by SOEs. It is the duty of a supervisory body, however, to adjust (limit) this framework to the conditions of their company and for their members of the management body.

The SSH Recommendations on Other Rights are based on an analysis of current Rules on Other Rights applicable in SOEs, of which SSH has been made familiar with at the General Meetings’ sessions in 2020 and before. The Recommendations has also taken into account the legal opinion by Dr Luka Tičar which discusses the eligibility of the management personnel to receive benefits under the Act Governing the Remuneration of Managers of Companies with Majority Ownership held by the Republic of Slovenia or Self-Governing Local Communities (hereinafter referred to as: “ZPPOGD”); the said legal opinion has been publicly published on the SSH's web site (Slovene version).

The goal of the SSH Recommendations on Other Rights is, firstly, to better unify the regulation of other rights among SOEs, particularly with respect to the rights which may incur additional costs for a company, and, secondly, to provide guidance on the highest permissible amounts. It is highly important that any doubts on the correct application of ZPPOGD are clarified and that all SOEs interpret the provisions of ZPPOGD in the same manner. The Recommendations on Other Rights will contribute to higher transparency in this field as they will be publicly published. In addition, they will act in a preventive manner as they should prevent or at least minimise any potential future mistakes or excesses.

In spite of the fact that the need for preparing the Recommendations on Other Rights has mainly be triggered by issues faced by SOEs which are liable to apply ZPPOGD, the Recommendations have been formulated in a systemic manner, taking into consideration the business practice of SOEs and are therefore addressed to all SOEs.

SSH expects from all SOEs to prudently examine the said recommendations and to include them in their legal documents (the Rules on Other Rights or the Remuneration Policy), and implement them accordingly in agreements regulating the services of members of management bodies.

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