Bankers had Cashed in Before the Music Stopped

From the Financial Times: According to the standard narrative, the meltdown of Bear Stearns and Lehman Brothers largely wiped out the wealth of their top executives. Many – in the media, academia and the financial sector – have used this account to dismiss the view that pay structures caused excessive risk-taking and that reforming such […]

Taming the Stock Option Game

From Project Syndicate: By Lucian Bebchuk and Jesse Fried Executive compensation is now a central concern of company boards and government regulators. There is an aspect to this debate, however, that deserves greater scrutiny: the freedom of executives to pick the moment when they can cash out on their equity-based incentives. Standard pay arrangements give […]

Reducing Incentives for Risk-Taking

From The New York Times Online: Lucian Bebchuk is professor of law, economics and finance and director of the corporate governance program at Harvard Law School, and Holger Spamann is co-executive director and fellow of this program. This post builds on their joint paper “Regulating Bankers’ Pay.” It is now widely accepted that compensation structures […]

Unblocking Corporate Governance Reform

From Project Syndicate: CAMBRIDGE – When they met earlier this month, G-20 finance ministers and central bankers called for global improvements in corporate governance. Such appeals are often heard, but powerful vested interests make it hard for governments to follow through. So, if serious reforms are to be implemented, strong and persistent public pressure will […]

Why Financial Pay Shouldn’t be Left to the Market

From Project Syndicate: Although some financial firms are reforming how they pay their employees, governments around the world are seriously considering regulating such firms’ compensation structures. The Basel Committee on Banking Supervision has recently come out in favor of such regulations, and the United States House of Representatives has voted to require regulators to set […]

Bonus Guarantees Can Fuel Risky Moves

From the Wall Street Journal: Financial firms seeking to attract and retain talent are reported to be making a substantial use of guaranteed bonuses, and the French Economy Minister recently called for limits on guaranteed bonuses. While many now focus on how using guaranteed bonuses affects the level of pay, it is important to recognize […]

Regulate Financial Pay to Reduce Risk-Taking

From the Financial Times: A bill requiring federal regulators to draw up rules for compensation structures in the financial sector was passed by the US House of Representatives on Friday and will be taken up by the US Senate. Such pay regulations, which authorities around the world are considering, will meet stiff resistance from financial […]

Paying for Performance at Goldman

From the Wall Street Journal: Last week, after reporting stellar second-quarter profit of $3.4 billion, Goldman announced the setting aside of $11.4 billion for compensation – which, broken down per employee, is similar to what Goldman set aside in the first half of the boom year of 2007. Goldman’s CFO argued that its pay decisions […]