2.4 Review of the remuneration policy

The supervisory function and, where established, the remuneration committee should ensure that the remuneration policy and practices of the investment firm are subject to a central and independent internal review at least annually. The review should include an analysis if the remuneration policy is gender neutral.

Investment firms should monitor the development of the gender pay gap; in case of investment firms with 50 staff or more, the calculation should be done separately on a country-by-country basis for:

• a. identified staff, excluding members of the management body;
• b. members of the management body in its management function;
• c. members of the management body in the supervisory function; and
• d. other staff.

Where material differences between the average pay between male and female staff or male and female members of the management body exist, investment firms should document the main reasons, take appropriate actions where relevant or should be able to demonstrate that the difference does not result from a remuneration policy that is not gender neutral.

In groups of investment firms, a central review of compliance with the regulation, group policies, procedures and internal rules should also be performed by the Union parent undertaking.

Investment firms should perform the central and independent review on an individual basis. In a group, subsidiaries may rely on the review performed by the Union parent undertaking or institution, where the review performed on the consolidated basis included the investment firm and where the results are made available to the supervisory function of that investment firm.

Notwithstanding the responsibility of the management body in its supervisory function, the tasks of the periodic independent review of remuneration policies may be, partially or totally, externally outsourced by investment firms.¹⁶

¹⁶ See EBA guidelines on outsourcing arrangements and Commission Delegated Regulation (EU) 2017/565 of 25 April 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive

As part of the central and independent internal review, investment firms should assess whether the overall remuneration policies, practices and processes:

• a. operate as intended (in particular, that approved policies, procedures and internal rules are being complied with; that the remuneration pay-outs are appropriate, in line with the business strategy; and that the risk profile, long-term objectives and other goals of the investment firm are adequately reflected);
• b. are compliant with national and international regulations, principles and standards; and
• c. are consistently implemented across the group and do not limit the investment firm’s ability to ensure a sound capital base in line with section 6 of these guidelines.

The other relevant internal corporate functions (i.e. human resources, legal, strategic planning, etc.), as well as other key supervisory function committees (i.e. audit, risk and nominations committees) should be closely involved in reviewing the remuneration policies of the investment firm in order to assure alignment with the investment firms’ risk management strategy and framework.

Where periodic reviews reveal that the remuneration policies do not operate as intended or prescribed or where recommendations are made, the remuneration committee, where established, or the supervisory function, should ensure that a remedial action plan is proposed, approved and timeously implemented.

The results of the performed internal review and actions taken to remedy any findings should be documented, either through written reports or through the minutes of the meeting of the relevant committees or the supervisory function, and made available to the management body, relevant committees and corporate functions.