Remuneration on the Management Board in Financial Institutions: Current Developments in the Framework of Supervisory Law, Labor Law, Behavioral Economics, and Practice

The article discusses selected topics in the current implementation of compensation systems for management boards in more detail, with the focus on the tension that regularly arises in compensation practice between the regulatory and labor law framework, behavioral economics, and (market) practice. To make the presentation more understandable, the regulatory legal bases generally refer to the requirements of CRD VI and cover topics that the national legislators of the individual E.U. member states have implemented in national law with the same content. It is shown that the practice of remuneration systems for management board members in institutions is based on a (mature) legal framework. Individual internal and external dynamic factors influence the further implementation of the remuneration systems for management board members and require a risk-based regular review process of the compatibility of the remuneration systems and their implementation with the regulatory requirements and the operational requirements of the institution, in particular from the updated business and risk strategy. Particularly, when it comes to the specific implementation of performance-related variable remuneration, institutions must take into account the dependence of regulatory requirements on the applicable labor and company law framework and reconcile these in a balanced and practicable manner. The question of whether the current (over)regulation will lead to a “regulatory infarction” in the near future remains to be discussed.