Recently, the clawback of salary recourse of many banks has attracted widespread attention from the market.
The Financial Times reporter combed through the 2023 annual performance reports of some banks and found that more and more banks have begun to strictly implement the performance pay recourse clawback mechanism.
According to the annual report data, last year, Bank of China carried out recourse and clawback for a total of 2,059 people, with a total amount of 22.75 million yuan; China Merchants Bank has reclaimed a total of 43.29 million yuan from 4,415 employees for the total amount of performance compensation; Bank of Tianjin recovered a total of 1.74 million yuan, and Weihai Bank recovered 272,800 yuan for performance compensation.
Lou Feipeng, a researcher at the Postal Savings Bank of China, analyzed in an interview with the Financial Times that for banks, the implementation of the performance-based pay recourse clawback mechanism is not only to implement the requirements of financial supervision, but also to help restrain the high-risk behavior of executives and key personnel, improve the soundness of the bank's operation, and help the bank partially recover losses after the risk occurs. "In 2023, banks will implement a performance-based pay recourse clawback mechanism on a large scale, which is not only due to the fact that more banks are strictly implementing the performance-based pay recourse clawback mechanism, but also the negative impact of financial risk exposure on banks triggers the performance-based pay recourse clawback mechanism." Lou Feipeng said.
In fact, in recent years, more and more banking institutions have joined the ranks of payroll clawbacks.
The relevant person in charge of China Guangfa Bank said that for senior managers and employees who have a direct or important impact on risks, the bank has continuously improved the system of deferred payment of performance pay and recourse clawback, and played a guiding role in the operation and management of performance compensation.
For example, in 2023, the Administrative Measures and Implementation Rules for Deferred Payment of Performance-based Compensation and Recourse Clawback will be issued to clarify the scope of applicable personnel and the proportion of deferred payment, refine the circumstances and standards for recourse and clawback, and improve the working procedures for recourse and clawback. In addition, the bank has established an incentive and restraint mechanism that links total salary, operating efficiency and performance appraisal in the same direction, adheres to the benefit-oriented, highlights value contribution, supports strategic priorities, and supports the grassroots frontline.
"From the perspective of future trends, the recourse clawback mechanism of performance-based compensation has a good effect on restraining senior executives and key personnel from engaging in high-risk business behaviors, and guides bank practitioners to comprehensively consider risks and returns, short-term and long-term, and carry out operations more prudently. In this regard, there are also clear requirements for financial supervision, so strict implementation by banks should become the norm. Lou Feipeng said.
In recent years, the regulatory authorities have continued to improve the system of deferred payment of performance-based remuneration and recourse clawback for financial institutions.
According to the "Three-year Action to Improve Corporate Governance in the Banking and Insurance Industry" issued by the former China Banking and Insurance Regulatory Commission in March 2023, more than 95% of institutions have formulated and implemented a system of deferred payment of performance-based remuneration and recourse clawback. Especially in some high-risk institutions, the relevant system has played an important role in holding non-compliant executives accountable and recovering asset losses.
Experts believe that, on the whole, the salary structure of banks needs to be able to take into account the fairness of the bank, and at the same time, more consideration of its incentive role, and the implementation of differentiated salary incentives according to the size of employees' contributions. The recourse and clawback mechanism for performance pay needs to be implemented carefully, but there are also clear requirements in the process, and the recourse and kickback of performance pay cannot be blindly expanded or simply carried out, and the legitimate rights and interests of relevant practitioners need to be effectively protected.
Source: Financial Times client
Reporter: Zhao Meng
Editor: Duan Jiaxi
Email: [email protected]