Bonus Caps Impact Pay Mix More Than Total Pay as Banks and Insurers Continue to Embed Sound Risk Culture
01 2월 2016 - 11:27PM
Business Wire
- Ratio caps driving more guaranteed
fixed pay
- 2016 base pay increases projected
between 2.0-2.7% in Europe and North America; Asia and Latin
America average at 4.3%
- Overall, 2016 pay to be static: lower
variable pay matched by fixed pay increases
A new report by Mercer highlights that 2015 saw the world’s
financial services organizations continue to respond to regulatory
developments by increasing fixed pay, decreasing variable pay
(bonuses), and increasing the emphasis on non-financial
performance. While processes to penalize misconduct and
non-compliance are widespread, rewarding positive risk behaviors
continues to be a challenge.
The data comes in the 11th edition of Mercer's Global Financial
Services Executive Compensation Snapshot Survey, which was
conducted in October and November of 2015. The survey reviews the
pay practices of 71 global financial services companies — banks,
insurers, and other financial services — based in 20 countries in
Europe, North America, Asia, and South America.
According to Vicki Elliott, Senior Partner and Leader of the
Global Financial Services Talent Network at Mercer, “The focus for
financial services firms is firmly trying to set the right tone
from the top with strong governance and high involvement of risk
management. Overall, total compensation levels remain broadly the
same compared to levels prior to regulated bonus caps. However,
banks, particularly in Europe, have significantly increased fixed
pay levels, improving the certainty of pay delivered to key
risk-takers.”
Pay
The report found that 61% of organizations had increased their
employees’ fixed pay by more than 5% while 58% percent had reduced
variable pay by more than 5%, marking a shift in pay mix. Total
compensation levels are expected to remain relatively unchanged in
2016 — within plus or minus 5% (92%) — and most organizations are
not planning further changes to their pay mix.
Overall, 2016 projected base salary increases for the sector are
modest with average forecasts globally expected to be between 2.0%
and 2.7%. Latin America, South America, and Asia are projecting
higher average salary increases (4.3%) while North America and
Europe are forecasting lower average salary increases of 2.4% and
2.3%, respectively. The banking industry is generally projecting
slightly lower salary increases than the insurance industry. The
majority of organizations predict 2016 annual incentive levels to
be similar to those in 2015; those expecting change predict that
levels will decrease.
“There continues to be a concern that increasing the focus on
fixed guaranteed pay breaks the link between pay and performance,
and may actually be counter-productive for aligning pay with risk,”
said Dirk Vink, Mercer Principal and Financial Services Project
Manager. “We have concluded that the most positive impact on sound
risk-taking behaviors and decision-making has come from
significantly improved governance and increased involvement of risk
management in the performance management and compensation
process.”
Fostering a sound risk culture
When asked how their organization is fostering a strong risk
culture, the most prevalent response was penalizing misconduct and
non-compliant behaviors (93%) followed by the role of risk
management in performance expectation setting and evaluation (89%).
Setting the right tone at the top of the organization, for example,
through top management leadership, communications and real
consequences, was also highly cited (88%), as was training and
coaching managers on sound risk culture (87%).
Intriguingly, with all parts of the business impacted by these
risk management efforts, the report highlights that some
organizations, particularly in North America, are finding it more
difficult to attract and retain staff in the crucial functions that
oversee these processes, the control functions (risk, legal and
compliance).
To learn more about the findings of Mercer’s Global Financial
Services Executive Compensation Snapshot Survey and the latest
information on changes and emerging trends in pay practices in the
current economic and regulatory environment please join our free
webcast on February 2. You can register here
http://bit.ly/23vTtOl.
About Mercer
Mercer is a global consulting leader in talent, health,
retirement and investments. Mercer helps clients around the world
advance the health, wealth and performance of their most vital
asset – their people. Mercer’s more than 20,000 employees are based
in 43 countries and the firm operates in over 140 countries. Mercer
is a wholly owned subsidiary of Marsh & McLennan Companies
(NYSE:MMC), a global professional services firm offering clients
advice and solutions in the areas of risk, strategy and people.
With 57,000 employees worldwide and annual revenue exceeding $13
billion, Marsh & McLennan Companies is also the parent company
of Marsh, a leader in insurance broking and risk management; Guy
Carpenter, a leader in providing risk and reinsurance intermediary
services; and Oliver Wyman, a leader in management consulting. For
more information, visit www.mercer.com. Follow Mercer on Twitter
@Mercer.
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version on businesswire.com: http://www.businesswire.com/news/home/20160201005737/en/
MercerStacy Bronstein,
+1-215-982-8025Stacy.Bronstein@mercer.com
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