Risk management and remuneration policy in financial sector : a regulatory perspective

Ethical approach towards shareholders' interests, in terms of value maximization within predefined risk appetite limits, is the fiduciary responsibility of the corporate governance bodies. However, numerous cases of excessive risk taking as well as inadequate management procedures demonstrate that this premise has been taken for granted. Ever since the first regulatory mechanisms have arisen in 18th century, the composition of the governing bodies, the selection criteria as well as the accountabilities have been subject of "comply or explain"-based codes of ethics and legislation. This paper analyzes the latest regulatory aspects of remuneration and risk management processes, as well as their intersections in the financial organisations in the EU.