- What are the main regulations in your jurisdiction governing ESG criteria/obligations in executive remuneration?
- What sectors/industries do these regulations cover?
- Which ESG-relevant pillars are covered by these regulations?
- What are the obligations for companies/directors/top management covered by these regulations?
- Is there a distinction between directors and top management employees in terms of ESG requirements?
- What are ESG-relevant requirements governing ESG obligations for non-executive employees’ remuneration?
- What are ESG-relevant requirements in terms of addressing the gap between executive and workforce remuneration and/or executive gender pay gap?
- Please describe the main features of the prescribed remuneration schemes (deferred payouts, timelines, thresholds, ceilings etc.)
- Are there rules or official guidelines regarding ESG performance measures and targets (KPIs) for directors'/top management's remuneration?
- What are the market practices regarding ESG criteria for executive remuneration?
- Did the market practices derive from self-regulation? For example: soft law or voluntary adoption standards issued by shareholder or governance associations, white books or GRI standards, etc.
- Are there different practices in different sectors and industries? For example: banking, energy, telecoms, insurance, listed companies, etc.
- What are the most common ESG KPIs you observe used by companies when defining ESG KPIs?
- Are the ESG KPIs included in the short-term remuneration, long-term remuneration or both?
- How large is the share of ESG-related variable remuneration in the variable remuneration as a whole?
- What are the ESG-related disclosure requirements, including reports to the regulator, in annual reports, etc.?
- What is the effect of these regulations on existing agreements? Do they overrule employment/civil law agreements when entering in force? How is this conflict solved in your jurisdiction?
- Is there a regulatory body in your jurisdiction overseeing ESG matters? If so, what measures can be taken by the authority?
- Are there prospects of any future regulations being adopted in your jurisdiction in this regard? For example: soft law regulations, private self-regulation initiatives, informal discussions on the transposition of EU Corporate Sustainability Reporting Directive, etc.
Jurisdiction
1. What are the main regulations in your jurisdiction governing ESG criteria/obligations in executive remuneration?
In Colombia, there are currently no specific regulations concerning ESG obligations when determining remuneration for executives.
Therefore, the only internal dispositions to consider when determining executive remuneration are that if the parties agree that the executive will receive an integral salary (which is expected to include the legal benefits component in the monthly salary), this salary must be equivalent to at least 13 minimum wages.
On the other hand, it is important to consider the constitutional right to equality, which requires that in all cases (not only for executives) there is due and objective equality in determining remuneration, which means there cannot be differences based on race, gender, age, sexual preference, or other personal aspects that may be considered discriminatory.
2. What sectors/industries do these regulations cover?
As mentioned above, there are no specific regulations regarding the remuneration of executives in the private sector, so it is common for private sector senior executives to have a remuneration higher than 13 minimum wages to ensure that it can be labelled as integral salary.
3. Which ESG-relevant pillars are covered by these regulations?
From a constitutional perspective, the main pillars are equality and dignity (meaning that employers must provide a salary that guarantees that the employees can afford dignified living conditions).
4. What are the obligations for companies/directors/top management covered by these regulations?
Companies must ensure that their remuneration schemes are designed and determined in accordance with reasonable indicators, avoiding behaviour that may be considered discriminatory.
5. Is there a distinction between directors and top management employees in terms of ESG requirements?
Not in Colombia. As mentioned above, there are no specific regulations for directors or top management employees in our country, and there are no regulations on ESG requirements (from a local perspective) either. There is also no differential treatment in relation to ESG, as the guidelines on this subject do not make any distinctions based on positions, despite the position or role of employees in the private sector.
6. What are ESG-relevant requirements governing ESG obligations for non-executive employees’ remuneration?
As mentioned above, considering that there is no distinction between executive and non-executive employees, in is important in both cases to uphold the pillars of equality, non-discrimination and dignity of remuneration.
7. What are ESG-relevant requirements in terms of addressing the gap between executive and workforce remuneration and/or executive gender pay gap?
We reiterate that while there are no specific ESG requirements regarding remuneration in Colombia, it is necessary to always ensure equality and dignity in the remuneration of all types of employees and to consider reasonable performance-based elements in determining remuneration schemes in all cases in order to address the disparity in relation to gender or type of workforce.
8. Please describe the main features of the prescribed remuneration schemes (deferred payouts, timelines, thresholds, ceilings etc.)
N/A – In Colombia, there are no prescribed remuneration schemes in relation to ESG.
9. Are there rules or official guidelines regarding ESG performance measures and targets (KPIs) for directors'/top management's remuneration?
Although Colombian internal rules do not regulate expressly how performance measures and targets are to be set, it is important to consider that, depending of the specific KPIs, the recognition of bonuses or benefits linked to the achievement of these targets are considered salary if they are linked to the employee's individual performance. In the case of KPIs related to corporate, global or group results, it is possible to classify them as non-salary benefits that are not considered for the calculation of statutory benefits or social security contributions.
10. What are the market practices regarding ESG criteria for executive remuneration?
Some trends regarding executive remuneration are: the granting of LTIs and STIs focused on awarding the employee´s performance individually and as part of the team. In some cases, executive remuneration also includes stock option arrangements to create a sense of belonging for the executive. Finally, in some cases it is common to establish golden parachute plans.
11. Did the market practices derive from self-regulation? For example: soft law or voluntary adoption standards issued by shareholder or governance associations, white books or GRI standards, etc.
Usually, these market practices come from internal company benefit policies that have been replicated by other similar companies seeking to retain talent.
12. Are there different practices in different sectors and industries? For example: banking, energy, telecoms, insurance, listed companies, etc.
Granting LTIs and STIs is common in service and sales companies. Nevertheless, other industries have replicated this scheme in order to motivate the performance of their key employees.
13. What are the most common ESG KPIs you observe used by companies when defining ESG KPIs?
Diversity and inclusion
Productivity
Equality
Employee Welfare
Health and Safety
Corporate Social Responsibility
14. Are the ESG KPIs included in the short-term remuneration, long-term remuneration or both?
In both the short and long term, most ESG KPIs are related to productivity. In some cases, there are also KPIs related to corporate social responsibility, where the high executives' or managers' bonuses or incentives are linked to a guarantee that no claims or investigations will be brought against the company in relation to non-compliance of obligations during their management.
15. How large is the share of ESG-related variable remuneration in the variable remuneration as a whole?
In Colombia there is no significant trend in ESG-related variable remuneration. As mentioned above, the KPIs are usually related to productivity.
16. What are the ESG-related disclosure requirements, including reports to the regulator, in annual reports, etc.?
In Colombia there is no legal obligation to disclose or report ESG-related issues as there are no regulations. Nevertheless, it is important to keep in mind that, in some auditing processes, compliance with ESG standards can be verified.
17. What is the effect of these regulations on existing agreements? Do they overrule employment/civil law agreements when entering in force? How is this conflict solved in your jurisdiction?
N/A In Colombia, there are no regulations that may overrule agreements.
18. Is there a regulatory body in your jurisdiction overseeing ESG matters? If so, what measures can be taken by the authority?
In Colombia, there is no specific regulatory body that oversees ESG. Nevertheless, the Ministry of Labour can conduct investigations related to verifying compliance with general employer obligations that can be linked to the social aspect of ESG.
19. Are there prospects of any future regulations being adopted in your jurisdiction in this regard? For example: soft law regulations, private self-regulation initiatives, informal discussions on the transposition of EU Corporate Sustainability Reporting Directive, etc.
Even though the current government has announced several bills related to social aspects of employment, the concept of “ESG” is still relatively new in Colombia, which is why there are currently no future regulations in this area. Nevertheless, the regulations on special and priority protection for maternity and paternity, as well as the regulations focused on ensuring mental health standards, indirectly contribute to the legal development of ESG.
