Call for pay to be structured around long-term company interests

The Association of Chartered Certified Accountants (ACCA) has called for remuneration and incentive schemes in the financial services sector to be structured to match the long-term interests of a company to remain fair and effective.

In a new report, entitled Future of Financial Regulation, the ACCA said adopting “ethics-based corporate cultures on remuneration and incentives would ensure financial institutions act in the long-term interests of their stakeholders".

“Recent scrutiny of executive remuneration schemes and boards has demonstrated that getting it wrong can be detrimental to a company’s reputation and long-term financial stability,” ACCA panel member Chris Campbell said.

The Future of Financial Regulation report provides nine key principles for regulators, boards and professionals to use as a blueprint for effective regulation.

Campbell said the three key principles Australia should look to improve are risk management and internal control, incentives and business conduct.

“Australian companies need to elevate the importance of risk management and internal audits to safeguard against financial threats and corporate failure,” he said.

"These organisations do have risk management policies in place but most are not transparent in how these are governed, implemented and reviewed.

"Organisations need to go beyond the minimum when it comes to disclosure as transparency is imperative to maintain ethical business conduct," Campbell said.