The Basel Committee on Banking Supervision issued a consultative paper on Thursday as the next step in forming standards on how financial institutions should pay top executives.
A peer review undertaken in the first quarter of 2010 found that "good progress had been made in areas related to governance, oversight and disclosure, but that further work was needed to raise the standard of adjustment to remuneration," according to the report.
It cautioned banks not to focus solely on top executives, but also groups of employees that together can have a strong impact on the firm."These could be either individual employees or groups of employees who may not pose a risk to the financial soundness of an institution on an individual basis, but may present a material risk on a collective basis," the report said.
The report also recommended that performance measures and the relationship to remuneration packages be clearly defined at the beginning of the performance measurement period, and that regular annual bonuses be based on rules, process and objectives that are known in advance.