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Regulating Remuneration in the Financial Services Sector – The Aftermath of the Financial Crisis

Miler, Alexandru Constantin LU (2011) JURM01 20102
Department of Law
Abstract (Swedish)
Finanskrisen har haft en global inverkan på det finansiella systemet och har krävt en översyn av hur finansiella åtaganden och överväganden hanteras. Krisen har även satt igång en debatt kring hur vissa sedan länge allmänt accepterade principer om interna bolagsstyrningsfrågor ska hanteras. Ett av de mest framstående problemen som har fått mycket uppmärksamhet av många olika intressenter är ersättnings- och bonuspolicys för chefer och ledningar i finansiella företag, och även personer som har varit inblandade i riskfylld handel i dessa företag.

Sedan uppkomsten av denna turbulens på finansmarknaden har ett antal olika dokument och förslag lagts fram av olika typer av institutioner, samtliga med mål att uppmärksamma berörda parter på... (More)
Finanskrisen har haft en global inverkan på det finansiella systemet och har krävt en översyn av hur finansiella åtaganden och överväganden hanteras. Krisen har även satt igång en debatt kring hur vissa sedan länge allmänt accepterade principer om interna bolagsstyrningsfrågor ska hanteras. Ett av de mest framstående problemen som har fått mycket uppmärksamhet av många olika intressenter är ersättnings- och bonuspolicys för chefer och ledningar i finansiella företag, och även personer som har varit inblandade i riskfylld handel i dessa företag.

Sedan uppkomsten av denna turbulens på finansmarknaden har ett antal olika dokument och förslag lagts fram av olika typer av institutioner, samtliga med mål att uppmärksamma berörda parter på behovet av att se över de kompensationsprinciper som för tillfället gäller i den finansiella sektorn. Det viktigaste initiativet kom från EU genom deras förslag om ersättningspolicys till ledande befattningshavare i noterade bolag och förslaget om ersättningspolicys i finansiella företag. Även FSB och CEBS har kommit med egna principer som måste beaktas av europeiska lagstiftare.

Även om konsensus råder mellan europeiska lagstiftare att det finns ett behov av översyn, kan det vara svårt att veta vilka faktorer som bör beaktas när man vidtar radikala förändringar. Därav frågan; hur har Europa hanterat frågan om ersättning och bonusar som uppmärksammades under finanskrisen?

I korthet har de europeiska lagstiftarna fokuserat på ett riskbaserat tillvägagångssätt som har utkristalliserat tre viktiga principer;

(i) bättre insyn och transparens

(ii) möjlighet till uppskjuten betalning, och

(iii) bättre balans mellan fast och rörlig ersättning.

Det återstår dock att se om de nya reglerna kommer att ha framgång och tillämpas konsekvent av berörda parter. Upprätthållandet av en proportionell tillämpning av reglerna och att inte dra alla aktörer över samma kant kommer att vara avgörande i den aspekten. (Less)
Abstract
The financial crisis that has been recently affecting the financial sector at a global level has led to the need to reflect on the way financial undertakings are managed. Consequently, it has also triggered a reflection on some commonly accepted and generalised principles related to internal governance. One of the most prominent issues that have been attracting the attention of different stakeholders, is related to remuneration practices applied to the members of the administrative, management or supervisory body and senior management of financial entities, as well as to personnel undertaking activities that involve risk-taking.

Since the emergence of the current financial market turbulence, several documents produced by different... (More)
The financial crisis that has been recently affecting the financial sector at a global level has led to the need to reflect on the way financial undertakings are managed. Consequently, it has also triggered a reflection on some commonly accepted and generalised principles related to internal governance. One of the most prominent issues that have been attracting the attention of different stakeholders, is related to remuneration practices applied to the members of the administrative, management or supervisory body and senior management of financial entities, as well as to personnel undertaking activities that involve risk-taking.

Since the emergence of the current financial market turbulence, several documents produced by different types of entities have been published with the purpose of alerting interested parties to the need of revising remuneration policies and schemes currently in place. The most important are the EU recommendations on director’s pay and on remuneration policies in the financial services sector. In addition, the principles on remuneration of the Financial Stability Board and the Committee of European Banking Supervisors have been taken into account by European regulators.

Even though consensus amongst European regulators is that change is required, it can be hard to know what factors to consider when making radical changes. So the question arises, how is Europe handling the “remuneration issue” highlighted by the financial crisis?

In short, the European regulators have focused on a risk-based approach that carves out three important principles;

(i) greater transparency,

(ii) possibility of deferred payment, and

(iii) greater balance between fixed and variable remuneration.

However, it remains to be seen whether the rules will be successful and applied consistently by financial institutions. Sustaining an acceptable level of proportionality and taking into account the different aspects of the targeted institutions will be crucial in that respect. (Less)
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@misc{1762619,
  abstract     = {The financial crisis that has been recently affecting the financial sector at a global level has led to the need to reflect on the way financial undertakings are managed. Consequently, it has also triggered a reflection on some commonly accepted and generalised principles related to internal governance. One of the most prominent issues that have been attracting the attention of different stakeholders, is related to remuneration practices applied to the members of the administrative, management or supervisory body and senior management of financial entities, as well as to personnel undertaking activities that involve risk-taking. 

Since the emergence of the current financial market turbulence, several documents produced by different types of entities have been published with the purpose of alerting interested parties to the need of revising remuneration policies and schemes currently in place. The most important are the EU recommendations on director’s pay and on remuneration policies in the financial services sector. In addition, the principles on remuneration of the Financial Stability Board and the Committee of European Banking Supervisors have been taken into account by European regulators.

Even though consensus amongst European regulators is that change is required, it can be hard to know what factors to consider when making radical changes. So the question arises, how is Europe handling the “remuneration issue” highlighted by the financial crisis?

In short, the European regulators have focused on a risk-based approach that carves out three important principles;

(i) greater transparency,

(ii) possibility of deferred payment, and

(iii) greater balance between fixed and variable remuneration.

However, it remains to be seen whether the rules will be successful and applied consistently by financial institutions. Sustaining an acceptable level of proportionality and taking into account the different aspects of the targeted institutions will be crucial in that respect.},
  author       = {Miler, Alexandru Constantin},
  keyword      = {konkurrensrätt (en. civil and criminal procedure),komparativ rätt (en. comparative law),IT-rätt,internationell privaträtt (en. private international law),immaterialrätt,förvaltningsrätt (en. administrative law),försäkringsrätt,förmögenhetsrätt,företagsekonomi,folkrätt (en. public international law),finansrätt (en. fiscal law),fastighetsrätt,familjerätt,EU-rätt (en. EU law),civilrätt (en. private law),boenderätt,bankrätt (en. banking law),avtalsrätt,associationsrätt,allmän rättslära (en. jurisprudence),arbetsrätt (en. labour law),rättsekonomi (en law and economics),rättshistoria (en. legal history),rättssociologi,rättsvetenskap (en. law),sakrätt,sjörätt,skadeståndsrätt,skatterätt,socialrätt (en. social and welfare law),statsrätt,straffrätt (en. criminal law),transporträtt,utrikeshandelsrätt,remuneration.},
  language     = {eng},
  note         = {Student Paper},
  title        = {Regulating Remuneration in the Financial Services Sector – The Aftermath of the Financial Crisis},
  year         = {2011},
}