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Promising Steps on Bank Pay ReformsSimon C. Y. WongNorthwestern University School of Law; London School of Economics; McKinsey & Co. Inc. April 1, 2011 Butterworths Journal of International Banking and Financial Law, April 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.
Number of Pages in PDF File: 1 Keywords: Compensation, financial institutions JEL Classification: G28, G29, G34, M52 Date posted: April 12, 2011 ; Last revised: May 19, 2011Suggested CitationContact Information
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