ANNEX: A COMPARISON OF THE CRD AND FSB
TEXT ON REMUNERATION
Risk and control functions:
Both the CRD and the FSB deal with employees in risk
and control functions. The FSB principles state that, "remuneration
should be determined independently of other business areas and
be adequate to attract qualified and experienced staff; and performance
measures should be based principally on the achievement of the
objectives of their functions."
The CRD states that such persons should receive "compensation
in accordance with the achievement of the objectives linked to
their functions independent of the performance of the business
areas they control."
The CRD text is therefore less flexible through not
including the word "principally" and contains no reference
to remuneration being adequate to attract qualified and experienced
staff.
Structure of pay for senior staff:
In respect of the structure of remuneration the text
and numbers used in both the FSB principles and the CRD and almost
the same; however, the FSB principles include the percentages
more as guidance, whereas the CRD includes them as minimums.
The FSB principles state:
"a substantial proportion, such as more
than 50 percent, of variable compensation should be awarded in
shares or share-linked instruments"
"a substantial portion of variable compensation,
such as 40 to 60 percent, should be payable under deferral arrangements
over a period of years" (defined to be not less than three
years.
"for the most senior management and the
most highly paid employees, the percentage of variable compensation
that is deferred should be substantially higher, for instance
above 60 percent."
"compensation payable under deferral arrangement
should generally vest no faster than on a pro rata basis."
In contrast the CRD states:
"a substantial portion, which is at least
50 % of any variable remuneration component is made in shares
or share-linked instruments"
"a substantial portion, which is at least
40 % of the variable remuneration component is deferred over a
period which is not less than three years"
"in the case of a variable remuneration
component of a particularly high amount, at least 60 % of the
amount is deferred."
"remuneration payable under deferral arrangements
vests no faster than on a pro-rata basis".
Fixed and variable pay:
The link between fixed and variable remuneration
is dealt with slightly differently in the CRD and FSB principles.
The FSB principles state that "a substantial
proportion of compensation should be variable and paid on the
basis of individual, business-unit and firm-wide measures that
adequately measure performance".
The CRD states that: "fixed and variable components
of total remuneration are appropriately balanced; the fixed component
represents a sufficiently high proportion of the total remuneration
to allow the operation of a fully flexible policy on variable
remuneration components, including the possibility to pay no variable
remuneration component" (this is a point that is included
in the FSA's Code of Practice on Remuneration).
Whether there is any difference of substance here
is a matter of interpretation, but there is the potential for
one to argue that the CRD text would require a higher base salary.
Disclosure:
The disclosure clause in the CRD has been drafted
along the lines of the FSB principles and in primarily a verbatim
reproduction. However, as described earlier, in contrast to the
remuneration principles, the disclosure points do not contain
a reference to proportionality in terms of their application.
| 
