The effectiveness of remuneration committees in European banks: Regulation and best practices

Abstract

Purpose

Following the subprime crisis and the detrimental role played by remuneration practices, an important reform concerned bank remuneration committees, especially in “significant financial institutions”. In light of this consideration, this paper aims to investigate the scope and format of this renewal in order to verify whether and how those bodies are conforming to the new regulatory framework while improving their efficiency and functionality.

Design/methodology/approach

The study was carried out on 30 top European banks through the elaboration of a qualitative analysis model that takes into account both the procedural and the compositional aspects of remuneration committees. The model was used as a benchmark for assessing the effectiveness of the remuneration committees operating within a sample. This assessment was carried out according to the content analysis approach.

Findings

The results show a high diffusion of these bodies within the banks and a gradual expansion, during the time under investigation (three years 2008-2010), of the information provided by them on their tasks and decision-making. In the same time, the study highlights some important criticalities concerning both the composition of the banks' remuneration committees, how they carry out their functions, and the level of disclosure addressed to shareholders and the market in order to formalize the results of their work.

Originality/value

The added value of the analysis is related to the implementation of an “effectiveness remuneration committee rating” applied to a sample of top European banks during the financial crisis.

Citation

Dell'Atti, A., Intonti, M. and Patrizia Iannuzzi, A. (2013), "The effectiveness of remuneration committees in European banks: Regulation and best practices", Journal of Financial Regulation and Compliance, Vol. 21 No. 4, pp. 373-396. https://doi.org/10.1108/JFRC-11-2012-0046