Remuneration on the Management Board in Financial Institutions: Current Developments in the Framework of Supervisory Law, Labor Law, Behavioral Economics, and Practice

Julia Redenius-Hövermann () and Lars Hinrichs
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Julia Redenius-Hövermann: Corporate Governance Institute (CGI) and the Frankfurt Competence Centre for German and Global Regulation (FCCR), Frankfurt School of Finance and Management, https://www.frankfurt-school.de/home/research/centres/corporate-governance-institute
Lars Hinrichs: Deloitte Legal, Frankfurt School of Finance and Management, https://www2.deloitte.com/dl/de/profiles/lars-hinrichs.html

Journal of Financial Transformation, 2025, vol. 60, 128-137

Abstract: The article discusses selected topics in the current implementation of compensation systems for management boards in more detail, with the focus on the tension that regularly arises in compensation practice between the regulatory and labor law framework, behavioral economics, and (market) practice. To make the presentation more understandable, the regulatory legal bases generally refer to the requirements of CRD VI and cover topics that the national legislators of the individual E.U. member states have implemented in national law with the same content. It is shown that the practice of remuneration systems for management board members in institutions is based on a (mature) legal framework. Individual internal and external dynamic factors influence the further implementation of the remuneration systems for management board members and require a risk-based regular review process of the compatibility of the remuneration systems and their implementation with the regulatory requirements and the operational requirements of the institution, in particular from the updated business and risk strategy. Particularly, when it comes to the specific implementation of performance-related variable remuneration, institutions must take into account the dependence of regulatory requirements on the applicable labor and company law framework and reconcile these in a balanced and practicable manner. The question of whether the current (over)regulation will lead to a “regulatory infarction” in the near future remains to be discussed.

Keywords: Management board remuneration; compensation systems; financial institutions; CRD VI; supervisory law; labor law; behavioral economics; variable remuneration; performance-based pay; regulatory compliance; EU banking regulation; remuneration governance; risk-based compensation review; remuneration practices; legal framework; corporate governance; regulatory-labor law tension; company law; overregulation; executive compensation (search for similar items in EconPapers)
JEL-codes: G40 J33 K22 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:ris:jofitr:3482

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