FSA sets out corporate remuneration goals

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The Financial Services Authority yesterday published much-anticipated new guidelines on pay at financial services companies.

The financial regulator, which said the overarching principle of its proposals is to structure companies so they avoid taking excessive risks, proposed raising the fixed salary component of remuneration, deferring a substantial part of bonuses, basing decisions about rewards on profits rather than turnover, and on putting a bigger onus on compliance with stated risk policies.

"If a firm's remuneration policies are not aligned with sound risk management it is likely that those policies will provide incentives for employees to act in ways that might undermine it," the FSA said.

A spokeswoman said the FSA, which will consult on the draft paper next month, expects firms to start following the guidelines now and will work with those whose remuneration policies it finds "inappropriate". The body said it is not concerned with setting levels of pay, which it said should be determined by the boards and shareholders.