The Walker Review of corporate governance in the UK banking industry has published its final recommendations. The independent review was commissioned by the Government last February in response to the 2007/2008 banking and credit crisis.

One of the most significant measures in Sir David Walker’s report is a proposal for greater pay transparency in large banks by requiring them publicly to disclose the number of employees earning more than £1 million per year, broken down by bands of salary. Other recommendations on pay include:

• Extending the role of banks’ remuneration committees to cover firm-wide remuneration policy and direct responsibility for the pay of all high earners.
• At least half of variable pay or bonuses should be paid in the form of a long-term incentive scheme, with half vesting after three years and the rest after five years.
• Two-thirds of cash bonuses should also be deferred.

The Government has indicated that it will move to implement Sir David’s proposals. Specifically, the recommendations on pay disclosure will be added to the Financial Services Bill which was introduced in Parliament on 19 November 2009. The Bill contains a requirement for the Financial Services Authority (FSA) to regulate financial sector remuneration to promote effective risk management and compliance with international standards. It includes powers under which the FSA could make rules to: prohibit specified types of remuneration; make contractual terms void if they breach such a prohibition; and provide for the clawback of payments made under void terms.