The Remuneration Measures for Financial Undertakings Act came into force on 1 January 2023. The remuneration policy of banks, investment firms and other financial enterprises must have already been amended for new personnel and it must be amended for existing personnel within the one-year transition period.
What are the most notable changes?
- The CBA exception allowing for deviation from the 20% bonus cap has been curbed. This is currently only possible in exceptional cases, foremployees in exceptional positions, such as specialised high-quality staff.Employees holding supervisory positions are no longer allowed to provide financial services to consumers. There is an annual obligation to report, including substantiation for using this exception. Within 12 months of applying the exception, the financial institution must provide substantiation to the supervisory authority about the exceptional circumstances led to the need to use the CBA exception.
- Employees of financial institutions whose fixed remuneration packages include shares or other instruments are obliged to retain those shares or instruments for at least five years. Contrary to the existing retention period under the Dutch Corporate Governance Code (apply or explain), this retention obligation can be enforced.
- Financial institutions must explain the relationship between their remuneration policy and the company’s social function in the directors’ report. This means that prior to the financial year, the remuneration policy should account for the ratio of remuneration, especially of senior executives, to the function of the company. Account must be rendered retrospectively in the directors’ report. The remuneration policy must be consistent with the nature of the activities and size of the enterprise.
The latter amendment fits in with the reason for this new legislation: restoring the public’s trust in financial institutions after the public debate on excessive remuneration in the banking sector. Enterprises must now account for their actions publicly.
A modern remuneration policy already applies the ESG criteria (Environment, Social and Governance). More and more companies are applying ESG-KPIs in their remuneration structure.
Subject to a one-year transitional period, the remuneration policy must comply with the new legislation (Financial Supervision Act) by 1 January 2024 at the latest. Please ensure that sufficient attention is paid to this in-house. It is not only the employer itself, but also the responsible directors – the “policymakers” – who can be subjected to a penalty if the remuneration policy does not comply with the Financial Supervision Act.