14.1.3 Specific criteria for control functions

Where control functions’ staff receive variable remuneration, it should be appraised and the variable part of remuneration determined separately from the business units they control, including the performance which results from business decisions (e.g. new product approval) where the control function is involved.

The criteria used for assessing the performance and risks should predominantly be based on the internal control functions’ objectives. Variable remuneration for control functions should predominantly follow from control objectives. Their variable remuneration may also be based to some extent on the performance of the investment firm as a whole. The investment firm should consider setting a significant lower ratio between the variable and the fixed components of remuneration for control functions compared to the business units they control.

If the head of the risk management function (Chief Risk Officer or CRO), where established, is also a member of the management body, the principles set out in paragraphs 226 and 227 should also apply to the CRO’s remuneration.

Where an investment firm does not establish and maintain an audit or risk management function, it should be able to demonstrate upon request that the performance criteria for staff in charge of the related processes do not provide for incentives to perform the control processes inappropriately.