Remuneration within the capital markets and investment banking sector is in the spotlight as never before. The economic downturn – and perceptions of the sector’s responsibility for bringing it about – have drawn hostile public and media attention to pay in the industry. The amendments to the Capital Requirement Directive (CRD3) imposing requirements on pay structure and disclosure both to the regulator and to the public is a measure of how significant the subject has become, and demonstrates how it has migrated from a matter of private policy to public scrutiny and regulatory oversight.
CRD3 was implemented in the UK via the FSA Remuneration Code, which includes 12 principles and can be split into three main areas: governance; risk alignment and transparency. The core principle being that firms should have remuneration policies and process that do not encourage employees to take inappropriate risk.
At the same time, firms are facing the ongoing need to attract and retain key talent to drive their growth while they also wrestle with a competing pressure to control costs. Squaring that particular circle in the current climate requires an imaginative approach to remuneration, and sensitivity to shareholder interests, regulators’ concerns and public perceptions.
At Deloitte we are drawing on our long experience of the sector and our expertise in tax to help clients implement risk-based remuneration schemes, employment cost saving ideas and achieve tax efficiencies. From smart pension and salary sacrifice schemes to bonus planning structures and performance share plans we are helping clients to develop remuneration vehicles that help them to sustain their talent attraction strategies while controlling costs and maintaining regulatory transparency. There can be little doubt that the pressure to reform remuneration policies and practices will continue but, in our view, there is much that companies can do to reconcile the conflicting demands of regulators, shareholders and the talent pool.