AIFMD - The approach to achieve a sound remuneration policy
Employees under
policy
Employees under
policy
Establishing
objectives and risks
Establishing
objectives and risks
Granting variable
remuneration
Determining
payment process
Approval of the
remuneration policy
Publication of the
policy
Determining which employees fall under the policy
The approach starts by establishing who the ‘identified staff’ is. They are the employees who, when
performing their duties, can have an impact on the risk profile of the administrator and the
administrated investment institutions. Who they are can differ per administrator, but this includes at
least the management and so-called ‘risk takers’ are concerned, such as traders and commercial
employees. Employees with a salary corresponding to the management’s also fall under the
remuneration policy, as well as employees in ‘controlling’ functions, such as compliance, risk
management and internal control functions.
Establishing objectives and risks
The administrator must establish the objectives of the administrator and the administrated
investment institutions and make a connection with the objectives of the remuneration policy. The
risks that possibly threaten these objectives also need to be identified. These may concern ‘soft’
risks, often difficult to measure, such as a reputation risk. Consequently what needs to be verified is
whether adequate measures have been put in place to control the identified risks. An example of a
controllable risk is the risk that employees meet their performance objectives in an undesirable way,
making them qualify for a variable remuneration ‘automatically’. The objectives that individual
employees need to meet in a certain period also need to be established.
AIFMD - The approach to achieve a sound remuneration policy
Employees under
policy
Granting variable
remuneration
Determining
payment process
Establishing
objectives and risks
Granting variable
remuneration
Determining
payment process
Approval of the
remuneration policy
Publication of the
policy
Granting variable remuneration
The administrator must have established which requirements and indicators an employee (or
group of employees) have to meet to qualify for variable remunerations. These must be
quantitative as well as qualitative, and the quantitative factors must be related to the possible
risks an employee can or is permitted to take within his function.
Determining payment process
What needs to be established with regard to the payment of remunerations is how and when a
variable remuneration is paid out, which part of it in the form of money and which part in
financial instruments. Which percentages are to be paid out when and according to what
criteria. An important part of this is the periodic check, at regular intervals, to see if the criteria
related to the remuneration are still being fulfilled. This serves to establish that the initial
activities with which the variable remunerations were ‘earned’ will also have positive effects in
the long run.
AIFMD - The approach to achieve a sound remuneration policy
Employees under
policy
Approval of the
remuneration policy
Publication of the
policy
Establishing
objectives and risks
Granting variable
remuneration
Determining
payment process
Approval of the
remuneration policy
Publication of the
policy
Approval of the remuneration policy
The policy must be drawn up under the responsibility and direction of senior management. It may be
supported by internal control, risk management and compliance function in order to come to a well
worked-out policy and an underlying analysis. The eventual approval of the policy happens through
the internal regulation function (the Supervisory Board).
Publication of the policy
The remuneration policy will have to be published internally as well as externally. There are
requirements for the contents of both publications. However, this does not mean that the received
variable remuneration of each employee individually needs to be made visible.