FSA code of practice will have no impact, say top business leaders

An overwhelming majority of top firms believe the Financial Services Authority’s (FSA) new code of practice will have little or no impact on how executives are rewarded.

A survey of 200 business leaders in major listed and privately-owned firms by law firm Pinsent Masons found more than eight in 10 thought the FSA code would make little difference, and more than three-quarters were not considering reviewing their severance terms to avoid executives getting large pay-outs.

The findings come as the FSA’s consultation on reforming remuneration practices in financial services closes, prior to possible implementation in the autumn.

The survey also follows a number of high-profile shareholder protests over remuneration policy. Earlier this month, shareholders in Royal Dutch Shell and mining company Xstrata protested over rewards to executives.

A number of large companies have raised concerns over restrictions on remuneration in recent months. RBS chief executive Stephen Hester said staff were leaving the bank because of concerns about government interference and bonuses.

Pinsent Masons employment partner Tom Flanagan said: “Businesses are in a catch-22 situation. They are under pressure to rein in benefits, which are now deemed excessive by some stakeholders, but they also need to retain their best talent to help get them through the recession. Not paying bonuses could lead to the exit of senior staff, which could explain why discretionary benefits continue to be granted even if the business is not performing well.”

Firms are also fearful of breaching employment contracts when changing pay structures, Flanagan added.

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