Babson Capital Europe Limited (“BCE”) substantially revised and formalised its remuneration policy (as amended) (the “Policy”) on 30 December 2010 in response to changes to regulatory requirements regarding remuneration practices, including the latest amendments to the Capital Requirements Directive (as implemented in the United Kingdom by the Financial Services Authority’s (“FSA”) revised Remuneration Code issued on 17 December 2010 (as amended) (the “Code”)) and forming part of the FSA Handbook of Rules and Guidance. The Policy applies to all of BCE’s employees and to the staff of BCE’s subsidiaries.
As a BIPRU limited licence firm that generates income from agency business without putting its balance sheet at risk, BCE is in Proportionality Tier Three of the Code. The FSA has given guidance that it would not be proportionate to require BCE to comply in full with the remuneration disclosure requirements. This is reflected in the following disclosures.
Decision-Making Process
BCE has a remuneration committee in the form of the “Babson Capital Europe Limited Senior Compensation Committee” (the “Remuneration Committee”) (although as a Proportionality Tier Three firm, BCE is not required by the Code to have a remuneration committee, and its terms of appointment are not required to - and do not conform to certain standards contemplated by the Code). The Remuneration Committee is appointed by BCE’s Board of Directors and comprises BCE’s Chairman and a senior executive from Massachusetts Mutual Life Insurance Company.
The Remuneration Committee is responsible for setting and implementing the Policy, periodically reviewing the Policy and approving any changes thereto. The Remuneration Committee also reviews and approves BCE’s annual promotions and compensation awards and exercises oversight over any material changes that may be proposed to BCE’s compensation structures.
Link between Pay and Performance
BCE’s remuneration structures are designed to support and further the firm’s business strategy, objectives, values and long-term interests. Packages aim to facilitate the retention of existing employees and attract high calibre new employees in order to achieve the best results for the firm and its clients.
Remuneration arrangements for BCE employees currently comprise some or all of the following components:
(a) fixed salary;
(b) a short term incentive scheme (“STI”);
(c) a long term incentive scheme (“LTI”); and
(d) share of carried interest in certain funds.
BCE’s variable remuneration arrangements are designed to align the interests of staff with BCE's profits and with the performance of the assets we manage for our clients. As such, a key principle of the STI and LTI awards is that they are linked to the performance of the individual and the firm. Individual performance is assessed by reference to personal objectives set in the previous year (including both financial and non-financial criteria), the views of line and senior management, and compliance behaviour. The total amount of variable remuneration available for STI and LTI awards in any given performance year is based on the profits of the firm. The amount paid out in respect of carried interest is based on the performance of assets managed by BCE.
The remuneration of employees who perform control functions (including Legal & Compliance and Human Resources) is generally structured such that the fixed component of total remuneration is higher than for employees involved in risk-taking activities. This, combined with certain restrictions relating to variable remuneration awards, is designed to strengthen the independence of employees performing control functions.
Aggregate Quantitative Information on Remuneration
The information below relates to the performance and financial year ending 31 December 2011. Comparative data is also provided for the financial year ending 2010, being the first year of disclosure. BCE only has one business area, being investment management.
| |
All Employees (£’000) |
Code Staff (£’000) |
| Total remuneration 2010 |
14,559 |
10,288 |
| Total remuneration 2011 |
18,086 |
12,717 |
Quantitative information on remuneration for BCE's Code Staff has not been broken down by (i) senior management, and (ii) members of staff whose actions have a material impact on the risk profile of the firm, on the basis that this would be inconsistent with BCE's obligations under relevant data protection legislation.
24 January 2013