FSB workshop on compensation practices 2021: Summary of discussion
On 18 and 19 May 2021, the Financial Stability Board (FSB) hosted an industry virtual workshop as a part of its regular assessment of the effectiveness of the implementation of the FSB’s Principles for Sound Compensation Practices and their Implementation Standards.
The workshop was an opportunity to exchange information on key compensation issues and challenges for the effective alignment of risk and compensation, with an additional focus on the impact of the pandemic on firms’ compensation practices. The workshop covered:
Non-financial criteria and measures, behaviours and firm culture – Participants identified trends in the use of non-financial criteria, potential differences across sectors and how these criteria affect and are affected by firm culture.
Effective alignment of risk and compensation – Participants identified effective practices for alignment between risk and compensation and how practices may vary across sectors.
Legal and regulatory issues – The discussion focused on the most significant legal and regulatory impediments to the use of compensation tools, such as malus and clawback and possible steps to address these. The session also explored firms’ use of severance pay.
COVID-19 and compensation – Participants discussed compensation-related actions firms and supervisors have taken in relation to COVID-19.
The discussions from the workshop are an input into the FSB’s ongoing work on identifying effective practices and enhancements to compensation frameworks.