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Finance: Performance Pay

Volume 715: debated on Monday 7 December 2009

Question

Asked by

To ask Her Majesty's Government whether they will hold discussions with the Financial Services Authority to ensure that managers in the financial sector receive salary deductions if their performances produce losses. [HL87]

The FSA and the Government have already taken action on pay in the financial services sector.

The FSA Remuneration Code comes into force on 1 January 2010 and includes provisions for the deferral and clawback of remuneration. It states clearly that it is good practice for deferred compensation to be subject to performance criteria.

The Financial Stability Board (FSB) Standards, agreed by member states at the Pittsburgh G20 summit in September, require that remuneration is subject to clawback.

In addition, the Government have included measures in the Financial Services Bill, introduced on 19 November, that bestow a duty on the FSA to ensure that remuneration is consistent with effective risk management and in line with the FSB standards.