Remuneration Code: Proportionality is key!

The UK’s Financial Services Authority (‘FSA’) has published consultation paper CP10/19’Revising the Remuneration Code’, which sets out proposed revisions to the Remuneration Code (the ‘Code’) introduced at the beginning of this year. Key proposals, if implemented, will require most investment firms to apply the following measures to high earning personnel:

• Bonuses to be based principally on profits

• A deferral of 40-60% of bonus amounts

• Development of a balance between fixed and variable remuneration

• Payment of a proportion of variable remuneration in shares, non-cash instruments or other share-equivalent instruments (subject to the legal structure of the firm)

• A claw back on deferred bonuses if the firm or the employee suffers a performance adjustment

• Restrictions on severance pay

These are possibly the most intrusive regulatory proposals ever made in UK, as they have a direct impact on the basis and timing of remuneration earned by investment professionals.

Read our full Insight by downloading the pdf on the right.