2015 Articles

The Great Fall of China - No Monkey Business

In October 2015, McLagan published an alert titled "The Great Fall of China?", where we discussed the slowdown in the Chinese economy, the steep fall in the Shanghai Composite and their potential impacts on pay in China and the Asia Pacific region. At the end of the year, and as we enter the Year of the Monkey, we've taken a fresh look at how that has played out in 2015 and what it could mean for 2016.

EBA Publishes Final Guidelines on Sound Remuneration Policies under CRD IV

The European Banking Authority (EBA) published its final guidelines on sound remuneration policies under CRD IV (Guidelines) on 21 December 2015. Following a strong industry response to the first draft of the Guidelines that was published in March 2015, there have been changes to the original text. Most notably, proportionality is not addressed in the Guidelines; instead a separate Opinion that is addressed to the European Commission (EC), European Parliament and Council has been published. The EBA’s Opinion on proportionality confirms that the EBA will provide guidance to the EC on potential changes to the text of the Directive to clarify how proportionality is to apply.

To Rate or Not to Rate: A Thoughtful Guide

In recent months, with increasing frequency, we have read of firms eliminating performance ratings and "blowing up performance management". Few trends in Human Resources have had more momentum and, while this might not be a popular thing to say, have been misunderstood or done with less forethought. Support for dismantling traditional performance management approaches has been informed by employee feedback, research, and positive intentions. But what sometimes feels missing in firms' change processes are rigorously defined desired end states, and thorough reviews of the role that performance management and ratings (specifically) play at those firms. We believe there is a sweet spot between "transformative" and traditional performance management. It will look a little different for each firm, particularly in financial services, where highly differentiated compensation is at the very core of how firms operate—but the sweet spot can only be achieved through rigor and not a rush to join a crowd. In this paper we will look at what is changing, what are the intended outcomes, who are the stakeholders in this change, and what are the specific implications for rewards at financial services firms. 

Competing in Hong Kong

The Competition Ordinance (Commencement) (no 2.) Notice 2015 was published in the Gazette on 17 July 2015, which declares 14 December 2015 as the effective date for the rule. This Ordinance, first outlined in 2012, restricts four types of conduct that are described as anti-competition - pricing manipulation, market division/allocation, output restriction or control, and bid rigging. Though not specifically targeted at employment matters, it is clear that the Competition Ordinance (CO) restricts practices like wage-fixing, formal and informal sharing of pay or benefits related information with competitors, industry-wide negotiations that impact wages and employment terms, and no-poaching agreements.

The Great Fall of China?

Impacts on compensation and talent management in China and Asia Pacific after the Recent Chinese Stock Market Correction and Renminbi Devaluation

Securities and Exchange Commission—Proposed Clawback Rules— Technical Insights

On July 1, 2015, the Securities and Exchange Commission (SEC) released proposed rules addressing the final executive compensation regulation required under Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”).  Proposed Exchange Act Rule 10D-1 requires the SEC to adopt rules directing the national securities exchanges and associations to prohibit the listing of any security of an issuer that does not develop and implement a policy providing for the disclosure and recovery of excess incentive-based compensation received by a current or former executive officer whenever the issuer is required to prepare an accounting restatement in order to correct erroneous financial data.

The Technology Talent Demand Convergence

It wasn’t so long ago that information technology (IT) was a back office function at most firms and, while companies would look at Apple or other innovators with envy or admiration, information technology was seen primarily as a way to execute or operate more efficiently – particularly at financial services and consulting firms. While there were pockets of innovation and firms dabbled with client-facing technology solutions, the overall IT focus was on automating repetitive tasks, storing and analyzing data, and running communication systems. As a result, the market for technology talent at financial and professional services firms was a relatively soft one.

Who wants to be an Investment Banker?

It is no secret that investment banks are concerned about their ability to attract and retain the best talent. The fading allure of investment banking as a career, increased competition for talent, reputational damage, cost pressure, regulation, and attitudinal shifts associated with the changing of the generational guard have all contributed to what is now widely regarded as one of the biggest challenges facing the industry.

Proposed Pay Versus Performance Rules Preliminary Observations

On April 29, the Securities and Exchange Commission (SEC) voted in favor of issuing proposed rules for the Pay Versus Performance disclosure that Congress included under Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Breaking the Digital Banking Talent Code

Innovative digital developments have had a profound impact on the day-to-day lives of individuals, including retail banking customers. In response, the banking industry has begun to embrace the digital era, where mobile apps and smart ATMs are no longer a luxury but have become a necessity. The wave of digitalization has led many banks to reevaluate their business and talent strategies to attract, engage, and reward a new generation of staff that can successfully transform their existing platforms and provide the digital experience their customers have come to expect.

EBA Consultation on Guidelines on Sound Remuneration Policies

On 4 March 2015, the European Banking Authority (EBA) published a consultation paper on draft guidelines on sound remuneration policies. These guidelines seek to clarify how firms and regulators should interpret the remuneration rules in CRD IV. The proposed text updates guidelines previously published by the Committee of European Banking Supervisors (CEBS – the forerunner to the EBA) about pay regulation under CRD III.