Financial Conduct Authority's letter to Remuneration Committee Chairs

The FCA's letter to remuneration committee chairs set out the FCA's findings and observations from the 2019/20 remuneration round and described how it intends to assess remuneration policies and practices throughout 2020/21.

The FCA recommend that firms continue to focus on maintaining a healthy organisational culture to drive the right behaviours during the period of uncertainty caused by COVID-19.  The right culture helps to make firms more resilient and contributes to long-term success. The letter also notes that remuneration and recognition are important drivers of culture.

During 2019/20, the FCA has seen firms continuing to embed conduct in their remuneration policies and practices through performance assessment measures including conduct objectives and responding to misconduct by adjusting variable remuneration.  The FCA has also engaged with firms positively influencing diversity and inclusion through their remuneration policies.

The FCA focused on the following topics for 2020/2021:

• Accountability – firms should ensure remuneration policies and practices remain aligned with their long-term business plans and reinforce healthy cultures and promote the right behaviours. The evolution of policies in response to the COVID-19 pandemic may be assessed.
• Ex-post risk adjustments – remuneration committee chairs should focus on how their firm makes consistent and timely judgements on adjustments to be made to remuneration as a result of major risk and performance issues.
• Diversity and inclusion – firms should push forward with their diversity agenda, taking into account gender and ethnic minority pay gaps and be aware of the risks that may have a negative impact on diverse and inclusive cultures. A positive difference can be made by firms proactively recognising particular issues that some people may face and aiming to take action where possible.