Salary in the financial sector

Date 20 apr. 2010

On 29 April 2009, the EU Commission presented a framework recommendation regarding salaries in the financial sector.


As a consequence of the framework recommendation, the Minister of Economic and Business Affairs established a task force to investigate salaries in the financial sector (“Task Force”). The Task Force’s purpose was to make suggestions on how to implement the Commission’s recommendation.


On 25 January 2010, the Task Force presented its proposal.



The proposal includes several important aspects:

  1. The decision procedure regarding the relation between the fixed salary and incentive fee is to be tightened up
  2. Large incentive fees should be based on longer periods of time
  3. At least 60% of the incentive fees shall be paid over a period of 3 years
  4. More clarity and guidelines regarding the payment of incentive fee
  5. The Danish Financial Supervisory Authority is charged with the task of controlling the financial companies’ policy on salaries.
  6. The rules will regulate both public and private companies.


It is important to note, that the framework recommendation  of the Commssion is not legally binding. However, the Task Force expects that the recommendation will be implemented through European legislation and, thus, become legally binding. Denmark, a country that already intended to amend its legislation, should therefore change the rules to bring them in accordance with the Task Force’s proposal.


The recommendation addresses risks associated with incentive fees and focuses on creating a balance between the employee’s personal desires and the financial company’s long-term interests. The employee’s incentive fee must, therefore, not encourage exaggerated acts of risk.


Based on the above, the Task Force has presented its recommendation areas.


It addresses three different subjects:

  1. Compliance with the recommendation of The Committee of Corporate Governance regarding salary policies of public companies
  2. Compliance with the recommendation of the Danish Bankers' Association, Insurance & Pension, the Association of Danish Mortgage Banks, the Union of Danish Mortgage Banks and the Danish Employers’ Association for the Financial Sector regarding salary policies
  3. Amendment of the Financial Business Act Section (“FBA”) 71, requiring financial companies to ensure that they have a salary policy that complies with and promotes a healthy and efficient risk management and that this policy may be controlled by the Danish Financial Supervisory Authority

The recommendation of the Commission applies to all employees in financial companies that are mentioned in the FBA. According to the Task Force, employees that are employed according to a labour agreement will not be affected by the recommendation, unless they have types of payments that transcend the framework determined in the labour agreement, including large bonuses. The recommendation applies to employees that are of essential materiel importance to the company’s risk profile.


Compliance with the recommendation of The Committee of Corporate Governance regarding salary policies of public companies.

The first part of the Task Force’s proposal addresses compliance with the recommendation of The Committee of Corporate Governance (“the Committee”).


The Committee is charged with determining which corporate governance norms apply to public companies.


The Committee has made a temporary recommendation on good corporate governance and the Committee expects to finish its work by the end of April 2010.


The temporary recommendation includes the following suggestions:

  • That the general meeting approves a salary policy regarding the board of directors and the board of management
  • That the salary policy is clear and precise
  • That limits on severance payment are established
  • That a repayment of bonuses becomes possible in very special cases
  • That all public financial companies must comply with the recommendations according to the comply or explain principal.

Even though the Committee’s recommendations only apply to public companies regulated by the FBA, the codex from the 5 organisations makes the recommendations applicable to private companies as well.


Compliance with the codex from the five sectoral associations.

The second part of the recommendations of the Task Force deals with the compliance of the salary policy presented by the Danish Bankers' Association, Insurance & Pension, the Association of Danish Mortgage Banks, the Union of Danish Mortgage Banks and the Danish Employers’ Association for the Financial Sector.


The five organisations have presented a codex that the members of the sectoral associations must comply with.


According to the the codex, the sector should comply with the recommendations of the Committee even though the companies are not publicly traded.


Among other things, the goals of the codex are,to ensure that a company has a policy that

  • is reasonable and efficient regarding risk management and that it does not encourage exaggerated risk taking
  • Complies with the business strategy of the company and is in accordance with the principals on protection of the customers and investors in connection with performance of the services
  • That supports an efficient company control

The codex applies to all risk takers who are a) the top management, b) the management approving trade with financial instruments, c) the management that invests the company’s own funds and d) management of the actuary division.


Furthermore, the codex contains requirements regarding the salary policy which must to be structured in a way that prevents conflicts of interest.


The codex must also secure a balance between the fixed wage and the incentive salary, meaning that the fixed wage should be sufficiently high.


Lastly, the codex will also contain provisions requiring employees to be instructed on the general principles in the salary policy.


Amendment of Section 71 of the FBA


The final part of the Task Force’s recommendations deals with an amendment of the FBA Section 71.


Currently, the FBA Section 71 contains provisions on demands on efficient company management, clear organisational structure with a well-defined, transparent and consistent distribution of responsibility and efficient procedures to identify and control risks that the company could exposed to.


The amendment will upgrade “efficient company management”, so this will be the main principle of the provision.


Addtionally, the Task Force recommends including a provision charging the Danish Financial Supervisory Authority with the responsibility to secure that financial companies have a salary policy that complies with the regulation and encourages a healthy and efficient risk management.


In connection herewith, it has been proposed that at least 60% of the variable  salary parts must be paid over a period of three years. The size of the bonus will be based on results over a longer period of time.


Therefore, the Danish Financial Supervisory Authority must control new areas of the financial sector.


The Task Force believes that implementing its proposals will make the the Danish rules comply with the recommendation of the Commission.


The Task Force’s recommendations have been presented to the parties behind the credit package, but the parties have yet to reach an agreement.



If you have any questions or require additional information on the above, please contact attorney Claus Molbech Bendtsen (, junior associate Lotte Witt ( or junior associate Pinar Gökcen (


The above does not constitute legal counselling, and Moalem Weitemeyer Bendtsen does not warrant the accuracy of the information. With the above text, Moalem Weitemeyer Bendtsen has not assumed responsibility of any kind as a consequence of a reader’s use of the above as a basis of decisions or considerations.