Chairman Hugh Scott-Barrett announced a root and branch review of the company’s compensation structure in April following a turbulent shareholder meeting which saw shareholders roundly reject a plan to award $16.1m in bonuses to upper management.
The eight-month review of its compensation structure has resulted in a framework “developed around four principles: pay for performance, alignment with shareholders’ long-term interests, transparency and the importance of sound risk management,” GAM said in a statement on Wednesday.
Shareholders will now have to approve all management bonuses in future, with the 2017 compensation plan due to go to a vote next April.
If approved, CEO Alexander Friedman and CFO Richard McNamara will have their annual bonuses capped at 250% and 200% of their respective salaries, and their long-term incentive plan (LTIP) award capped at 200% of their salary.
Total annual bonuses and incentives for the eight members of GAM’s group management board will be capped at 5% of the company’s underlying pre-tax profit.
However, this cap will exclude any “variable compensation” as well as social security, pension contributions and one-time awards for new board members, the firm added.
Earlier this year, Institutional Shareholder Services said there were “considerable doubts” over how appropriate decision-making was in relation to management pay outs.
“The remuneration system appears to lack appropriate safeguards against inappropriate or excessive pay,” it said.
Across the GAM group, a target compensation ratio of 45-50% of underlying net fee and commission income has been set.
The firm has also pledged to improve transparency with a promise to reveal the targets set for financial performance that are used to determine bonuses.
