On Wednesday, the FSA announced new codes that will require large organisations to implement remuneration packages consistent with effective risk management. The codes aim to ensure remuneration policies are sustainable - so linked with the long-term profits of the business.
John Terry, head of reward at PricewaterhouseCoopers, believes the codes, which leave the decisions about compensation structures to individual employers, will put real pressure on them to get it right. He said: "Care must be taken to link deferral to the organisations underlying business model, the real long and short-term risks and the sustainable nature of revenues. This presents a challenging combination of factors requiring careful thought."
He added: "The code represents a welcome step forward in the process of reforming the areas of financial services employee reward that are in need of change. The FSA has sought and developed a regulatory framework that links the reward structures of employees with the long-term sustainable returns generated in the businesses where they work. It also aims to create a strong link between employee reward and business risk."
FSA code of practice will put pressure on employers' reward strategy
The Financial Service Authority's (FSA) code of practice on remuneration will be 'critical' to creating a sustainable and effective approach to rewarding executives, according to one financial expert.
