BERLIN, June 18 (Reuters) - Germany's lower house of parliament, the Bundestag, on Thursday approved a law which will place restrictions on executive pay. Chancellor Angela Merkel's coalition of conservatives and Social Democrats (SPD) hope the law will encourage firms to focus on long-term performance rather than short-term gain.
According to the new rules, board members will only be able to cash in their share options after four years, not after two as at present. They also make it easier for supervisory boards to cut board pay in the case of "extraordinary" developments.
In addition, supervisory boards will be subject to increased liability if they approve excessive salaries for management.
If management board members are held liable for damage to their firm, they can be made to pay for this out of their own pocket. The figure will total at least ten percent of the damage, but no more than 1.5 times their fixed annual salary.
Disclosure of executive compensation will become mandatory unless three quarters of the ownership vote against it.
(Reporting by Klaus Lauer and Dave Graham; Editing by Victoria Main)