A practical playbook for Remuneration Committees and Compliance

Often a subject of controversy, financial industry pay is utilised not only to incentivise high performance but also to manage risk-taking, embed culture and values, and curb non-financial misconduct. Jack Prettejohn presents a framework for remuneration and compliance functions to align their efforts towards both business and regulatory goals.

Jack Prettejohn (jack.prettejohn@aoshearman.com) is a senior associate with A&O Shearman who has broad experience advising banks, brokers, investment firms, asset managers, traders and market infrastructure providers. He specialises in regulatory issues primarily relating to prudential regulation, cross-border trading, remuneration, market infrastructure and corporate re-structuring.

Boards, shareholders and regulators all look to the Remuneration Committee to protect the firm's interests and help drive performance. In United Kingdom banks and investment firms, the committee is central to helping firms meet their obligation to use remuneration to promote sound and effective risk management, and to align its remuneration policy and practice with its business strategy, objectives and long-term interests. Remuneration is a tool to curb excessive risk-taking and to embed the firm's culture and values. The Financial Conduct Authority in particular is focused on using remuneration as a means to manage non-financial misconduct at the firms it regulates. The Remuneration Committee's role, therefore, directly links with the Compliance function's mandate and both are more effective when they act together.