Financial Stability Board Issues Implementation Standards On Compensation

The Financial Stability Board (FSB) issued today Implementation Standards for the FSB Principles for Sound Compensation Practices.

The standards respond to a call by the G20 Finance Ministers and Governors for the FSB to set out for the Pittsburgh Summit detailed specific proposals on compensation governance, structure and disclosure to strengthen adherence to the FSB Principles, issued in April 2009.

The standards focus on areas in which especially rapid progress is needed, including:

independent and effective board oversight of compensation policies and practices;

linkages of the total variable compensation pool to the overall performance of the firm and the need to maintain a sound capital base;

compensation structure and risk alignment, including deferral, vesting and clawback arrangements;

limitations on guaranteed bonuses;

enhanced public disclosure and transparency of compensation; and

enhanced supervisory oversight of compensation, including corrective measures if necessary.

The report is available on the FSB’s website, www.financialstabilityboard.org.