On 31 October 2023, the FCA published a Dear Remuneration Committee Chair letter, setting out some key areas to consider and to factor into the firm’s remuneration approach.

Key points set out in the letter include:

• As set out in the FCA’s recent joint Policy Statement PS23/15 with the PRA, the regulators aim to make the remuneration regime more effective by increasing the proportion of compensation at risk and subject to the incentive-setting tools in the remuneration framework.
• Firms should prioritise embedding the Consumer Duty in their business to provide customers with products and services that meet their needs and offer fair value on an ongoing basis. The FCA encourages firms to consider how they can use relevant risk metrics and performance criteria to help inform both individual and firm-wide remuneration decisions, including making remuneration adjustments if progress in embedding the Duty falls short.
• The FCA expects firms to encourage a culture in which staff feel able to speak up, particularly where they see something which could affect the outcomes for consumers or markets or create a significant risk of harm.
• It also expects roles and responsibilities in a firm to be clearly explained, with clear goals and expectations to enable an effective system of individual accountability.
• Firms should continue to maintain gender neutral pay policies in line with the FCA’s existing requirements and make sure that awards of variable remuneration do not discriminate on the basis of any protected characteristic.
• A growing number of firms have committed to sustainability-related objectives – most notably net zero commitments. Where a firm has made such claims and commitments, the FCA expects that the firm will link appropriately its strategy, governance arrangements and remuneration structures to these. The FCA also expects firms to ensure they have the relevant skills and capabilities across the organisation.

The FCA concludes by stating that it expects Remuneration Committee Chairs to take the letter into account in their role and welcomes their response on how they will be adopting the principles outlined in this letter.