European Recommendations and Directives on Remuneration of Statutory Bodies
The reasons for adoption of the recommendations relating to remuneration and consequently the adoption of the directive for the banking sector, included especially an excessive and imprudent exposure to risks by employees and management mainly through payments of inappropriately high bonuses linked only to short-term results without considering the performance of the relevant manager or director or the entire company.
The main goal of these documents is to achieve transparency in remuneration and to harmonise the personal aims of employees, managers and directors with corporate long-term interests.
CRD (Capital Requirements Directive) III
Capital Requirements Directive III (CRD III), regulating, among others, remuneration in financial institutions, was adopted in line with the Commission Recommendation on remuneration policies in the financial services sector.
Key principles of this regulation:
- Linking remuneration to performance based on long-term results;
- Remuneration consisting of fixed and flexible components;
- A part of the flexible component consisting of shares or other non-monetary instruments;
- Delay in the payment of the flexible component of remuneration for an appropriate period;
- Introduction of new concepts: malus and claw back;
- Malus allows a company not to award the flexible component of remuneration in part or as a whole, e.g. due to a company's unsustainable financial situation or insufficient performance.
- Claw back allows a company to withdraw the flexible component of remuneration awarded, or a part thereof, and to require that the flexible remuneration component that was already paid be returned (to the extent that it is not in conflict with the mandatory provisions of another act).
- Application of remuneration rules and individual principles under the proportionality basis with respect to a financial institution's size, number of employees, market share etc.
Act on Capital Market Undertakings (CZ only) ( for informative purposes )
Directive 2010/76/EU, amending Directives 2006/48/ES and 2006/49/ES as regards capital requirements for the trading book and for re-securitisations, and the supervisory review of remuneration policies (CRD III)
Includes the principles of effective corporate governance intended especially for large financial institutions for the purposes of financial system’s stability.
Publication date: 10/2011 | File size: 3.8 MB