Executive Compensation Structuring in Georgian Law
Structuring the compensation of a chief executive in Georgia is regulated most concretely in the context of the accountable enterprise. This corpus defines the transparency of incomes toward shareholders, the control of compensation decisions through the conflict-of-interest regime, and the duty standard against which bonus schemes are approved. The American practice of advisory votes on pay, deferred-compensation tax regimes and clawback mechanisms has no Georgian equivalent — these are non-Georgian constructs. The Georgian carrier is the regime of income transparency and conflict-of-interest control that binds accountable issuers.
Disclosure of Governing-Body Members' Incomes
A shareholder of an accountable enterprise has the right to receive information about the salary and other incomes received from the enterprise by directors or members of the board of directors and members of the supervisory board. At the same time, the shareholder is prohibited from disclosing this information to third parties. The enterprise is not obliged to provide the shareholder with this information separately if it is already included in the enterprise's last annual report or semi-annual report that is accessible to shareholders. This exception means executive incomes must be fully reflected in the core reporting.
Compensation and the Conflict-of-Interest Regime
A compensation-related decision may be treated as an interested transaction. A governing-body member and/or a shareholder owning directly or indirectly 20% or more of the total votes is an interested person if he or a related person is the other party to the transaction, owns 20% or more of the other party's votes, manages the other party, was appointed on its recommendation, receives under the transaction a benefit not connected with share ownership or board membership, or is defined as interested by the charter. The interested person must immediately notify the supervisory board in writing of the fact of the interest and of the nature and volume of the transaction, and — where the general meeting approves the transaction — must declare it to the meeting as well. A governing-body member must notify the supervisory board in writing immediately upon learning of a conflict.
Interested persons are prohibited from voting, and the remaining votes are treated as the full number of votes. Notably, these requirements do not apply to a transaction concluded between the accountable enterprise and its 100% subsidiary or its 100% shareholder.