It will be interesting to see if this regulatory regime will apply post-Brexit at all. In 2014, when these reforms were introduced, the Chancellor of the Exchequer George Osborne threatened legal action to oppose them, arguing that the cap would increase bankers’ fixed pay which is guaranteed even where banks have performed badly. Variable bonus pay would be subject to claw back arrangements and withheld by the banks if employees did something wrong or underperformed. Osborne argued that a cap may lead to a disregard for performance levels and guaranteed high levels of remuneration, making sanctions harder to impose. However, the Advocate General of the ECJ advised against these legal proceedings and the UK has complied with the banking regulations since. Post-Brexit, whilst banks may be given free rein to pay unlimited bonuses, this may bring the UK in line with New York, Singapore and Hong Kong. If policies are properly drafted, UK bankers could be encouraged to operate in even more innovative ways in a global environment though this will undoubtedly raise further public concern.
It will be interesting to see how Brexit negotiations will play out and the reactions of businesses globally. In the meantime, when approaching how to structure executive pay packages and ensure that the best talent is retained and appropriately rewarded, it is important for remuneration structures to remain resilient, adaptable and flexible to business needs. If you would like to know more about executive benchmarking, please get in touch.
The autumn edition of our reward survey is now open as we continue to capture the views of business around the UK. Participants will receive a free copy of the UK Reward Management Survey results in November.