Unintended Consequences of Executive Compensation Regulation Threatens to Worsen the Financial Crisis

Abstract

This written testimony accompanied Professor J.W. Verret's oral testimony before the House Committee on Financial Services. This testimony argues that executive compensation proposals by the Administration will not address any systemic risk posed by large financial institutions. It also argues that quarterly earnings guidance is a more useful target to limit systemic risk than executive compensation practices at financial firms.

Keywords: Bank of America, bailout, Barney Frank, Christopher Cox, Deutsche Bank, Federal Reserve Board, Mary Schapiro, Obama, SEC, Say on Pay, Securities and Exchange Commission, Spencer Bachus, TARP, Wall Street

JEL Classification: G24, G28, G38