Following commitments in the Queen’s Speech, the government has now introduced the Financial Services Bill to Parliament. The Bill proposes to allow the Financial Services Authority (FSA) to nullify contracts and clauses relating to bonuses, although one has to question whether the legislation will make its way through parliament before the election.
If enacted the FSA would have the power to make regulations to:
- prohibit specified types of remuneration in order to promote effective risk management e.g. multi-year guaranteed recruitment bonuses and cash bonus lump sums
- nullify any individual employment contract that encourages inappropriate risk taking - as bonuses are normally discretionary clauses one wonders how this will work
- to make provision for the recovery of payments made under a contract contrary to those rules
- a right for the Treasury to make regulations to require preparation, approval and disclosure of remuneration reports by banks and other financial institutions
- a requirement to disclose the remuneration of directors and employees of particular types (a separate report last week by Sir David Walker recommended that salaries of £1m plus should be disclosed but not by name)
HM Treasury has produced
FAQs on the Bill.
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