Summary
Firms shall have a remuneration policy that is consistent with good risk management and does not encourage short-term profits and excessive risk-taking. The new regulation provides guidance regarding how performance should be measured and how risks should be managed when applying variable compensation.The board of directors’ responsibility for the firm’s remuneration policy is clarified as well as which information regarding remuneration should be disclosed in conjunction with the annual report.
For employees whose actions can have a material impact on the risk exposure of the firm, at least 60 per cent of the variable remuneration should be deferred for at least three years. The firm can decide that the deferred payment can be cancelled in part or in whole under certain circumstances, such as if the firm’s position is significantly weakened.
The regulation is based on the EU Commission's recommendation K(2009) 3159 governing remuneration policy within the financial services sector. In these efforts, Finansinspektionen has also implemented the global principles for sound remuneration systems which were adopted at the G20 meeting in September 2009.
The new regulations and general guidelines entered into force on 1 January 2010. A company shall, in terms of employees whose actions can have a material impact on the firm's risk exposure, in decisions regarding remuneration for the period prior to 1 January 2010, apply the regulations and general guidelines contained in Chapters 2 and 5.