USA: 'Commonsense corporate governance principles' published

A group comprising of well known company directors, investment managers and institutional investors (including the head of the Canada Pension Plan Investment Board), has published a series of corporate governance principles - described as 'commonsense' - for public companies: see here (pdf). The principles cover the following matters: board composition and internal governance; board responsibilities; shareholder rights; public reporting; board leadership; management succession planning; compensation of management; asset managers' role in corporate governance. Further background information is available here.

UK: KPMG's Guide to Directors' Remuneration 2013

KPMG has published its Guide to Directors’ Remuneration 2013, which presents an analysis of the pay of FTSE350 directors: see here (pdf).

South Africa: Nominee non-executive director not entitled to fees and bonuses

The Supreme Court of Appeal gave judgment last Friday in Public Investment Corporation v Bodigelo (128/2013) [2013] ZASCA 156: see here (pdf). The case concerned an employee, Mr Bodigelo, appointed by his (former) employer (PIC) to act as a non-executive director of four companies in which it had invested. The non-executive directors of these companies were paid directors' fees and bonuses but in Mr Bodigelo's case these were paid to PIC. Mr Bodigelo argued that he was entitled to the fees and bonuses. His claim was upheld by the North Gauteng High Court but rejected by the Supreme Court of Appeal. In doing so the court held, amongst other things, that the fact that Mr Bodigelo was required to exercise his discretion as a director of the four companies unfettered by the interests of PIC, did not mean that it was impossible for his functions as a director to be carried out in the context of his employment with PIC.

UK: FSA Remuneration Code - FSA consults on revised proportionality guidance

The Financial Services Authority has published for consultation revised guidance on proportionality in respect of the Remuneration Code (SYSC 19A) and Pillar 3 disclosures on remuneration (BIPRU 11): see here (pdf). A new framework is proposed, replacing the current four tier structure (based on capital resources) with one containing three levels based on total assets.

UK: Remuneration Code and Pillar 3 disclosures on remuneration - FSA guidance on proportionality

The Financial Services Authority has, in respect of the Remuneration Code (SYSC 19A) and the Pillar 3 disclosures on remuneration (BIPRU 11), published general guidance on proportionality: see here (pdf).

UK: monitoring the implementation of the FSA Remuneration Code

A revised edition of the Remuneration Code published by the Financial Services Authority came into force on 1 January 2011. The FSA has recently published for consultation proposed 'Dear CEO' letters which explain its plans for monitoring implementation of the Code in the next remuneration round: see here.

UK: High Pay Commission publishes interim report

An interim report - titled More for Less: what has happened to pay at the top and does it matter? - was published today by the High Pay Commission: see here (pdf). The Commission will publish detailed policy proposals later this year; its interim reports identifies serious weaknesses in the current framework, including ineffective shareholders and remuneration committees, as well as a lack of meaningful disclosure.

UK: FSA consults on remuneration code guidance

The Financial Services Authority has published for consultation guidance on its Remuneration Code: see here. Included with the guidance are tools to help firms comply with the Code which, the FSA states, firms can begin to use immediately.

Note on Easter updates: the next update will appear on Tuesday, 26 April.

UK: FSA publishes revised Remuneration Code

The Financial Services Authority has published a revised edition of its Remuneration Code: see here (pdf). For further background information see here.

UK: FSA consults on remuneration disclosure requirements

The Financial Services Authority has published a consultation paper regarding its implementation of the remuneration disclosure requirements set out in the Third Capital Requirements Directive: see here (pdf). The consultation period closes on 8 December and the FSA intends to publish a policy statement on remuneration disclosure in the middle of December.

The FSA has also formally announced (see here) that next month it will publish a policy statement in response to proposed changes to its Remuneration Code. The revised Remuneration Code will come into force on 1 January 2011 and will apply to awards paid out in respect of the 2010 remuneration round. The FSA has stated that firms coming into the scope of the Code for the first time will be able to make use of transitional provisions to implement certain provisions of the Code over a period of six months.

UK: FSA's remuneration code - policy statement on proposed changes delayed

Earlier this year the Financial Services Authority consulted on changes to its remuneration code and stated that a policy statement would be published this month, with new rules taking effect on 1 January 2011: see here. However, in the latest edition of the FSA's Handbook development newsletter, available here (pdf), it's stated that the policy statement (and presumably the revised code) will be published next month.

UK: the FSA Remuneration Code - wider scope and other changes proposed

The Financial Services Authority has published a consultation paper in which it sets out proposed changes to its Remuneration Code in the light of the Capital Requirements Directive and the Financial Services Act (2010): see here (pdf). The consultation paper also reports on the implementation of the Code to date and the lessons learned.

The proposed changes will result in the Code applying to over 2,500 firms, including all banks and building societies, asset managers, hedge fund managers, UCITS investment firms as well as some firms that engage in corporate finance, venture capital, the provision of financial advice and stockbrokers. An overview of the changes, including those relating to the structure of remuneration, is available here.

UK: bank remuneration and the role of Government

The Financial Secretary to HM Treasury, Mark Hoban MP, delivered a speech last night at the British Banker's Association annual industry dinner. With regard to remuneration, the Financial Secretary stated:

The fate of banks in terms of public trust and respect rests also in your hands. A key way of regaining public trust will be by reforming the system of remuneration. We have the opportunity to send a clear message to the public that the banking system now operates in a way that is fair and stable and no longer rewards employees based on short-term performance whilst leaving investors and taxpayers exposed to the long-term risks. It is better for the industry to lead these changes.

But there is a role for the Government too. We will explore the costs and benefits of a Financial Activities Tax on profits and remuneration, and we will ask the FSA to examine further options in the forthcoming review of its remuneration code. And we will be encouraging all G20 members to implement the FSB principles on remuneration rigorously".

UK: the bank levy and bank remuneration

In today's budget the Government announced the introduction of a bank levy. The levy will apply to: the consolidated balance sheet of UK banking groups and building societies; the aggregated subsidiary and branch balance sheets of foreign banks and banking groups operating in the UK; and the balance sheets of UK banks in non-banking groups. Further information is available here (pdf). The budget report is available here.

The budget report also states, in a short paragraph titled "Bank remuneration" at para. 2.79:

The Government will explore the costs and benefits of a Financial Activities Tax. The Government has asked the FSA to consider a number of factors in its forthcoming review of its Remuneration Code. Alongside this the Government will consult on a remuneration disclosure regime".

UK: election 2010 - Lib Dem bank bonus proposals

As part of their general election campaign, and ahead of the publication of their manifesto, the Liberal Democrats published a statement yesterday setting out proposed new rules governing bank bonuses: see here. The proposed rules are as follows (to quote directly from the statement):

• No cash bonuses – We will require all bonuses in excess of £2,500 to be paid in shares. These shares will only be redeemable after five years; it will be written into the right of entitlement of these shares that they will revert to the company if they are pledged or used as security prior to the date of their redemption.
• No bonuses at board level – We will ensure there are no bonuses at the board level of banks. This is not to say that board directors should not be well paid, but that they should have the long term interests of a company at heart - bonus payments do not encourage this.
• No rewards for failure – We will extend the Financial Services Act [and Markets Act (2000)] to ensure that no regulated institution which has made a loss can pay discretionary bonuses.
• Total transparency – We will require the publication of the names of all bank staff that have salaries and bonuses that are greater than the Prime Minster’s salary (which is just under £200,000). In addition we will require the FSA to publish its assessment of all regulated firms remuneration policy.
• Holding directors to account – We will extend the powers of the FSA to ensure that the directors of banks are personally fined if their institution breaks the current code of practice for remuneration.

UK: corporate governance - an FSA perspective

Yesterday, at a corporate governance seminar organised by the Building Societies Association, the FSA's Director of Permissions, Decisions and Reporting (Graeme Ashley-Fenn) delivered a speech titled Corporate Governance - an FSA Perspective: see here. The speech provides a useful overview of some of the actions that the FSA has taken with regard to governance of regulated firms as well as its proposals in the recently published consultation paper Effective Corporate Governance (CP10/3).

UK: FSA decides not to extend its remuneration code

The Financial Services Authority has today announced that its remuneration code - which comes into force for large banks, building societies and broker dealers on 1 January 2010 - will not be extended to other FSA authorised firms. For further information, see here. 

UK: the Financial Services Bill - first reading in the House of Commons

The Financial Services Bill received its first reading in the House of Commons today. The Bill's second reading is provisionally scheduled for 30 November. A copy of the Bill as introduced at first reading is available here (html) and here (pdf). Explanatory notes are available here (html) and here (pdf). The Bill contains 19 clauses, arranged as follows:

• The Council for Financial Stability (clauses 1, 2, 3 and 4).
• The objectives of the Financial Services Authority (clauses 5, 6, 7 and 8).
• The remuneration of executives of authorised persons (clauses 9, 10 and 11).
• Recovery and resolution plans (clause 12).
• Short selling (clause 13).
• The FSA's disciplinary powers (clauses 14, 15, 16 and 17).
• Collective proceedings (clauses 18 and 19).
  

The clauses concerning remuneration have attracted widespread attention. Clause 9 gives the Treasury the power to make regulations (a form of secondary legislation) regarding the preparation, approval and disclosure of executives' remuneration reports. 

Clause 11 will amend the Financial Services and Markets Act (2000) through the insertion of new section 139A. Section 139A will require the Financial Services Authority to impose on authorised firms the obligation to have, and to act in accordance with, a remuneration policy. This remuneration policy must be consistent with the effective management of risks and the Implementation Standards for Principles for Sound Compensation Practices issued by the Financial Stability Board on 25 September 2009. Where a remuneration policy is not consistent with these requirements, Section 139A(7) states that the FSA "must take such steps as it considers appropriate to deal with the failure" and in this regard it is specifically given the power to require changes in the remuneration policy. 

Section 139A(9) provides that the FSA's rules on remuneration may prohibit individuals from receiving certain types of remuneration, with agreements in contravention of this prohibition being void.

UK: FSA Handbook: remuneration code added

The remuneration code published yesterday by the Financial Services Authority has now been added to the FSA Handbook: click here to view it (you will need to change the handbook date at the top of the page to 1 January 2010). A permanent link has been added on the right of this page. 

UK: Sants defends FSA's remuneration code

"Watchdog 'gives green light' for huge City bonuses" is the headline of a front page report in today's Times newspaper, following publication yesterday of the Financial Services Authority's remuneration code. The FSA's chief executive, Hector Sants, has addressed this and other criticism in an interview this morning on the BBC Radio 4 Today programme (listen here). Mr Sants repeated the point that he has made already with regard to the FSA's role: it is not the regulator's role to challenge the remuneration of individuals where remuneration within firms is consistent with effective risk management. Mr Sants added that where remuneration - particularly bonuses - is seen by many to be excessive relative to rewards elsewhere in society, that is a matter for Government. 

Update (13 August 2009): Mr Sants' comments have been reported here and here by, respectively, the Guardian and Telegraph newspapers.