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Article
Publication date: 14 June 2011

Dan Ornstein

The purpose of this paper is to explain the final version of the Remuneration Code, published by the Financial Services Authority (FSA) in December 2010, which deals with…

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807

Abstract

Purpose

The purpose of this paper is to explain the final version of the Remuneration Code, published by the Financial Services Authority (FSA) in December 2010, which deals with remuneration in the financial services industry and incorporates requirements contained in the latest version of the European Union (EU) Capital Requirements Directive (CRD3).

Design/methodology/approach

The paper gives an overview of the Code, focusing on its scope; the deadlines for compliance; the constraints on variable remuneration; the proportional application of the Code through the division of businesses covered by the Code into four tiers, each with different compliance requirements; and voiding provisions – i.e. provisions which render certain contractual terms on variable remuneration void if they breach Code requirements. It also summarizes the related and new obligations on disclosure of remuneration, which were published by the FSA at the same time as the Code.

Findings

The overriding objective of the Code is to ensure that remuneration policies, procedures and practices do not undermine effective risk management.

Practical implications

Now the details have been published and deadlines for compliance set, it is imperative that those in the financial services industry with UK operations, whether in the UK or elsewhere, start taking steps straightaway to ensure that their remuneration policies, practices and procedures are compliant with the new regulatory regime.

Originality/value

The paper provides practical guidance from experienced securities lawyers.

Details

Journal of Investment Compliance, vol. 12 no. 2
Type: Research Article
ISSN: 1528-5812

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The Theory and Practice of Directors’ Remuneration
Type: Book
ISBN: 978-1-78560-683-0

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Article
Publication date: 9 May 2016

Ernestine Ndzi

This paper aims to examine the two different approaches adopted in the UK to regulate directors’ remuneration. The paper also aims to explore the two approaches to…

Abstract

Purpose

This paper aims to examine the two different approaches adopted in the UK to regulate directors’ remuneration. The paper also aims to explore the two approaches to understand which one better regulates directors’ pay and why. It provides an account of the two approaches’ evolution, effectiveness and challenges towards the regulation of directors’ remuneration. The paper will also make some recommendations on both approaches and the way forward to better regulate directors’ remuneration.

Design/methodology/approach

The paper reviews various corporate governance codes, its recommendations on directors’ remuneration, its effectiveness and the challenges it face in regulating directors’ remuneration. The paper also reviews provisions of the Companies Act 2006 on directors’ remuneration, its effectiveness and challenges faced.

Findings

The paper finds that corporate governance adopts a better approach to regulating directors’ pay than the Companies Act 2006 because it targets the pay setting process. However, the existence of grey areas and lack of enforcement procedure poses a challenge on its effectiveness. The Companies Act 2006 is unable to regulate directors’ pay adequately because it adopts a corrective approach and it considers directors’ remuneration as a management responsibility.

Originality/value

The paper offers an up-to-date assessment of the two approaches to regulating directors’ pay in the UK. It highlights the challenges faced by both approaches and which approach could regulate directors pay better and its challenges. The paper further makes recommendations on how the regulation of directors’ remuneration can be effective in the UK.

Details

International Journal of Law and Management, vol. 58 no. 3
Type: Research Article
ISSN: 1754-243X

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Article
Publication date: 6 May 2014

Chrispas Nyombi

This paper aims to explore the role corporate personality has played in the battle between executive remuneration and fairness, which is linked to rewarding performance…

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1682

Abstract

Purpose

This paper aims to explore the role corporate personality has played in the battle between executive remuneration and fairness, which is linked to rewarding performance. This paper also aims to explore some of the policy measures taken by the UK Government to curb excessive remuneration especially in the banking sector.

Design/methodology/approach

This paper employs an analytical approach. An analytical approach relies on the collection of new information upon which to base any conclusions. The research supports the arguments being made in the paper.

Findings

The paper shows how the ruling in Salomon, over a century ago, that cemented corporate personality and limited liability in the UK, is hampering many of the measures aimed at rewarding performance and promoting fairness in relation to executive remuneration.

Originality/value

Limited research has been done on executive remuneration. Since executive pay has recently hit the media agenda, this paper purports to tackle a current and ongoing issue.

Details

International Journal of Law and Management, vol. 56 no. 3
Type: Research Article
ISSN: 1754-243X

Keywords

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Details

The Theory and Practice of Directors’ Remuneration
Type: Book
ISBN: 978-1-78560-683-0

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Article
Publication date: 20 November 2009

Philip J. Morgan and Neil Nick Robson

The purpose of this paper is to explain UK Financial Services Authority (FSA) Policy Statement 09/15, Reforming Remuneration Practices in Financial Services, (the “Code”…

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184

Abstract

Purpose

The purpose of this paper is to explain UK Financial Services Authority (FSA) Policy Statement 09/15, Reforming Remuneration Practices in Financial Services, (the “Code”) which requires certain large banks, building societies and broker‐dealers in the UK to establish, implement and maintain remuneration policies that are consistent with and promote effective risk management.

Design/methodology/approach

The paper explains the background to the Code, including the FSA's views on bonuses and remuneration; describes the characteristics of the approximately 26 large firms to which the Code will apply; discusses the Code's principles concerning remuneration; details the timing of the key steps for implementation of the Code; explains information on remuneration firms must provide to the FSA; and discusses the FSA's plans for follow‐up.

Practical implications

The FSA is likely to publish similar remuneration guidelines that will extend to all FSA‐authorized firms.

Originality/value

The paper provides practical guidance from experienced financial services lawyers; a possible bellwether of future similar policies from financial regulators in other countries.

Details

Journal of Investment Compliance, vol. 10 no. 4
Type: Research Article
ISSN: 1528-5812

Keywords

Content available
Book part
Publication date: 26 November 2016

Abstract

Details

The Theory and Practice of Directors’ Remuneration
Type: Book
ISBN: 978-1-78560-683-0

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Article
Publication date: 18 November 2013

Jonathan Ben Shlomo, Wolfgang Eggert and Tristan Nguyen

The recent financial crisis has shown that in substantial parts of the banking industry, bonus payments have a short-term focus and are not risk-adjusted. These…

Abstract

Purpose

The recent financial crisis has shown that in substantial parts of the banking industry, bonus payments have a short-term focus and are not risk-adjusted. These remuneration structures persist as the banking industry is constrained by pressures on the labour market. The unilateral introduction of a longer-term focus in variable remuneration could put a bank at a first-mover disadvantage. The paper aims to discuss these issues.

Design/methodology/approach

The paper derives from a literature overview and empirical evidence possible reform measurements toward a longer-term focus in variable remuneration. The paper also discusses the recent reforms in European law regarding remuneration policy.

Findings

The paper argues that an efficient regulation of remuneration policy should be directed at ensuring that remuneration policies and practices are aligned with effective risk management. The financial authorities should therefore closely observe market developments in this perspective and take countermeasures if necessary.

Originality/value

This seminar work gives some interesting insights about opportunistic behaviour and a CEO's short-term incentives from an economic point of view. It provides lawmakers, regulators and firms with a comprehensive comparison of recent remuneration reforms in Europe.

Details

Qualitative Research in Financial Markets, vol. 5 no. 3
Type: Research Article
ISSN: 1755-4179

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Article
Publication date: 13 July 2015

Ernestine Ndzi

The purpose of this paper is to investigate the nature of advice that the remuneration consultants offer to the companies on executive pay. It explores how the advice…

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691

Abstract

Purpose

The purpose of this paper is to investigate the nature of advice that the remuneration consultants offer to the companies on executive pay. It explores how the advice offered affects the level of executive remuneration. Furthermore, it investigates whether the nature of advice offered forms part of the reasons why remuneration consultants have been criticised to be correlated with high executive pay.

Design/methodology/approach

This paper analysis the data obtained from interviewing remuneration consultants from prominent consultancy firms that operate in the UK and the USA.

Findings

This paper demonstrates that remuneration consultants’ advice on executive remuneration is not always objective. The nature of advice depends on whether the consultants have a balance of portfolio of companies (self-interest) or whether they have the courage to stand up to confrontations from the executives (fear of executives). This study shows that the purpose of using remuneration consultants in advising on executive remuneration is defeated. Also, the practice pushes up pay levels.

Research limitations/implications

The research focused on large consultancy firm operating in the UK and/or the USA. Access to the participants was very difficult due to their busy schedules.

Practical implications

This paper demonstrates the effect that lack of best practice on benchmarking is partly responsible for the high executive pay levels.

Social implications

This paper will inform companies on the nature of advice that remuneration consultant’s offer and its effect on pay levels. Secondly, it will provide the shareholders with vital information they require to vote on remuneration policy in the annual general meeting.

Originality/value

This paper demonstrates the effect that lack of best practice on benchmarking is partly responsible for the high executive pay levels. This paper will inform companies on the nature of advice that remuneration consultant’s offer and its effect on pay levels. Secondly, it will provide the shareholders with vital information they require to vote on remuneration policy in the annual general meeting. Lastly, it informs policymakers on the grey areas of practice that requires best practice.

Details

International Journal of Law and Management, vol. 57 no. 4
Type: Research Article
ISSN: 1754-243X

Keywords

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Abstract

Details

The Theory and Practice of Directors’ Remuneration
Type: Book
ISBN: 978-1-78560-683-0

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