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Some Banks’ Pay Reform May Show the Way

Financial Times, March 14, 2011

2 Pages Posted: 15 Mar 2011 Last revised: 20 May 2011

Simon C. Y. Wong

Northwestern University School of Law; London School of Economics; McKinsey & Co. Inc.

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Date Written: 2011

Abstract

The way some financial institutions are implementing compensation reforms suggests a strengthening alignment of interest among executives, their firms, and wider society.

First, through mandatory deferral, payment in equity, and other mechanisms, bankers’ pay is more exposed to longer-term performance outcomes of their firms. Second, performance and payouts are increasingly evaluated through a multi-year lens. Third, risk considerations are now better incorporated into compensation arrangements.

Although problematic remuneration practices remain, the progressive steps taken by some banks provide a reason for optimism that their compensation arrangements will not pose the same danger to systemic stability as in years past.

Keywords: Compensation, Financial Institutions

JEL Classification: G28, G29, G34, M52

Suggested Citation

Wong, Simon C. Y., Some Banks’ Pay Reform May Show the Way (2011). Financial Times, March 14, 2011. Available at SSRN: https://ssrn.com/abstract=1784772

Simon C. Y. Wong (Contact Author)

Northwestern University School of Law ( email )

375 E. Chicago Ave
Chicago, IL 60611
United States

London School of Economics

Houghton Street
London, WC2A 2AE
United Kingdom

HOME PAGE: http://www.lse.ac.uk/collections/law/staff/simon-wong.htm

McKinsey & Co. Inc. ( email )

1 Jermyn Street
London, England SW1Y 4UH
United Kingdom

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