FSA code of practice on remuneration policies – PwC comment

Published at 10:19 AM on 26 February 2009

  • PwC welcomes code of practice and wholeheartedly supports emphasis on governance
  • New focus on using risk-adjusted long-term incentive measures also fully supported
  • Impact will clearly be greatest within financial services but the code has far wider implications

The Financial Services Authority (FSA) has today published a code of practice on UK remuneration policies which asserts firms must ensure that their remuneration policies are consistent with effective risk management. This General Principle is supported by ten Specific Principles under the headings of Governance, Measurement of performance for the calculation of bonuses, Measurement of performance for long-term incentive plans and Composition of remuneration.

The code is aligned with the Good Practice principles published in letters to CEOs from the FSA in October 2008 though it is notable that the principle of Governance has been promoted from fourth to first place.

Michael Rendell, partner and global head of human resource services, PricewaterhouseCoopers LLP, commented:

“The code gets to the heart of what is required to reform compensation in the UK financial services sector but as ever the devil will be in the detail. The promotion of governance to the top of the list of principles is absolutely right – no technical provision can substitute for well-constituted and implemented governance. Particularly eye catching is the spotlight being shone on Remuneration Committee Chairs, with a requirement for an annual statement on remuneration policy, on which the Remuneration Committee Chair may be interviewed.

“The code calls for a significant proportion of bonuses to be deferred (which in many cases will be higher than historic levels) and we support the linkage to future performance, which should be risk-adjusted. Companies should feel emboldened to work with shareholders in replacing total shareholder return and earnings per share measures with provisions specific to the organisation.

“Clearly the major impact will be felt in financial services, but many of the principles will have wider application and we can expect to see change beyond this sector.” 


Notes to Editors:

1. The FSA code is available at www.fsa.gov.uk 

For more information contact:

Lydia Ruffles
Financial Services, PR Manager, PwC 
Tel:+44 (0)20 7212 1798 
Mobile:07966 319 780 

Michael Rendell
Partner, PricewaterhouseCoopers LLP 
Tel:+44 (0)20 7212 4945 
Mobile: +44 (0)7808 904 333 


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