News

The current crisis in financial markets has brought about a great awareness on the role of remuneration and incentive structures in risk management for executives in the finance sector. UNI-Europa Finance welcomes the European Commission's initiative to review the Recommendation on Directors’ Remuneration with a view to strengthening risk management.

"There is, however, a fundamental problem with directors’ pay that goes beyond the risk management dimension. With hindsight, pay levels of senior managers and traders have been much too high; their positive contribution to revenue generation was only short-term", says Oliver Röthig, Head of UNI Finance.

"Accordingly, the entire system of how decisions are made on pay schemes, including the individual amount, should be reviewed", he says. "There is a clear conclusion that the responsible decision makers (managers and non-executive directors) have neglected their fiduciary duties by granting excessive pay deals. These duties have to be reviewed as well".

Appropriate remuneration systems are key to ensure the development of a new long-term oriented, risk-conscious business model. UNI-Europa Finance therefore stresses that:

1. Remuneration and incentive systems for directors should be transparent, accountable, realistic and fair as well as based on long-term, sustainable business goals.

2. In the finance sector, prudent supervision should oversee that remuneration structures at all levels – incl. sales and advice functions – are appropriate and risk conscious. Authorities should be able to penalise inappropriate practice.

3. There should be structured dialogue between unions in the finance sector and supervision authorities at national, regional and global levels to address this issue and other internal practices affecting companies’ risk management and the stability of the financial system.



Risk assessment is not only dependent on directors’ pay. Remuneration structures and incentive systems at all levels should be taken into account in companies’ risk assessments. In the finance sector, remuneration structures for employees at lower levels play a major systemic role in risk management and are a potentially destabilising factor in financial markets. This was made clear in UNI-Europa Finance’s submission to the Commission for the Recommendation on Remuneration in the Financial Services Sector.

For the text of the submission, see "Related Files".

Further contributions to the EU were given on:

• financial markets supervison
• remuneration in the financial services sector
• retail investment products
• financial inclusion

UNI Finance's statement and key issues paper on finanical reform can be found here:

"http://www.uniglobalunion.org/Apps/iportal.nsf/pages/20090324_flp3En"