Regulatory framework, Corporate Governance & Remuneration Codes
At the time of writing there are a number of external factors that can impact on the payment of bonuses particularly in the financial services sector. These include: the Listing Rules; the UK Corporate Governance Code and the FCA/PRA Remuneration Code.
Amongst other things, the Corporate Governance Code sets out that businesses under its remit must avoid reward for poor performance and are advised to partly pay bonuses in shares and/or phase the entitlements over a period of years.
The Remuneration Code applies more stringent regulation to many organisations in the financial services sector and their ‘code staff’ (including, amongst others, senior managers and those classed as risk-takers). This currently includes amongst a wider set of provisions a percentage of variable remuneration that must be deferred pro rata over a period of years; a percentage of variable remuneration that must be paid in non-cash elements (such as shares or share options); and adjustment mechanisms to cover different eventualities (including repayment). Please see here for more details.