Documents considered by the Committee on 25 November 2009, including the following recommendations for debate: Security of gas supply Mutual legal assistance in criminal matters between the EU and Japan - European Scrutiny Committee Contents


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.



 
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