Iris H.-Y. Chiu, Michael McKee, Anna P. Donovan, Rod Edmunds, Andreas Kokkinis, John Lowry, Marc T. Moore and Arad Reisberg
Chapter 5: DESIGN AND CONTROL OF REMUNERATION IN UK BANKS
Undoubtedly the most controversial corporate governance issue in UK banks over recent years has been the arguably ‘excessive’ remuneration awarded to senior banking executives and other key bank employees. This chapter will explain the most common forms of directorial and executive remuneration in public companies. It will then document the basic legal principles that govern the determination of directors’ remuneration in UK companies, together with the proper procedures for directorial remuneration-setting as provided under both the Companies Act 2006 and UK Corporate Governance Code (The Code), including remuneration committees and ‘say on pay’ resolutions. The chapter will furthermore examine the various regulatory provisions that are designed to ensure the effective alignment of pay with performance and risk tolerance in public companies, with particular regard to those provisions that are uniquely applicable to banks. These include the rules relating to bonus payments, executive share options, restricted share grants, and severance payments (‘golden parachutes’). Regard will be had both to the general rules in this regard, and also to the specific requirements that apply to banks under the Financial Conduct Authority/Prudential Regulation Authority Remuneration Code (Remuneration Code). Of particular concern will be the extensive and detailed regulatory restrictions on the payment of bonuses to high-level bank employees today, including the controversial new EU‘bonus cap’. The chapter’s principal focus will be on the legal and regulatory framework applicable to those (typically larger) UK-incorporated banks operating as public companies, and which are listed on the London Stock Exchange.
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