Dear Chair of the Remuneration Committee | Release Date: 2nd August 2022
To read a longer summary of this Dear Chair of the Remuneration Committee letter, click here.
To access the original FCA document, click here.
Short Summary
The FCA’s letter to the Chairs of the Remuneration Committees outlines expectations and guidance for aligning remuneration policies with the firm’s purpose, strategy, values, and current economic conditions. The letter emphasises the importance of remuneration committees in fostering a culture that supports operational performance and customer needs, while also driving shareholder value. Key focus areas include ensuring remuneration policies are risk-focused, promoting a strong risk culture, and maintaining accountability through the Senior Managers and Certification Regime (SM&CR).
The FCA encourages the integration of Environmental, Social, and Governance (ESG) considerations and Diversity and Inclusion (D&I) into firm operations. It announces upcoming consultations on measures to enhance D&I within the financial services sector. Additionally, the letter touches on the new Consumer Duty, which sets higher standards for customer care that should be reflected in remuneration strategies.
Given the rising cost of living and economic pressures like inflation and interest rate hikes, the FCA expects remuneration policies to consider the broader economic impact on consumers and how firms support those facing financial difficulties. The letter also stresses the significance of operational resilience and the role of remuneration policies in responding to service disruptions and other operational challenges.
Key Take-aways for Affected Readers:
Remuneration committees should ensure that their firm’s pay structures support and do not undermine a healthy corporate culture and risk management practices. They must integrate ESG goals and consumer protection standards into their remuneration policies, especially in light of new regulatory expectations and the current economic environment. Committees are also expected to prepare for enhanced focus on D&I in their remuneration practices, in line with forthcoming FCA regulations.