Legal Updates

Deviation from the remuneration policy will be made according to the role the corporate officer actually performed and not his formal definition

October 28, 2024
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A public company entered into an employment agreement with an employee for the position of CEO. When in practice he was tasked with performing the duties of the previous CEO, president, and chairman of the company, while the compensation he was offered exceeded the maximum compensation set forth in the company's remuneration policy but was lower than that set for the president.

The Court held that when examining a question of deviation from the remuneration policy, the role that was actually performed should be examined. An agreement with an office holder, including a CEO, that was made contrary to the company's remuneration policy is null and void, and if services have already been provided to the company, then the company must pay only proper salary and the office holder must return amounts that were paid to him in excess. The classification of the employee's position for the purpose of examining existence of a deviation from remuneration policy will be done by a substantive examination of the functions that the employee fulfilled and not necessarily according to his title. Here, an employee was hired for the position of "CEO", but in practice he fulfilled the role of the company’s president and chairman as well. Hence, the contract signed with him as CEO is void, however because in practice he had also function as president, the salary he was entitled to is the salary of a president according to the remuneration policy. Therefore, the salary he actually received, which was lower than the maximum salary for the president according to the remuneration policy, is the proper salary and he is not required to return any funds to the company.