Financial Crisis, Excessive Pay And Fat Cats: Why Employment Scholars Should Start Reflecting on Regulation of Executive Remuneration

Bocconi Legal Studies Research Paper No. 3681952

The Italian Law Journal (2020) 2

25 Pages Posted: 27 Aug 2020 Last revised: 9 Feb 2021

See all articles by Giovanni Gaudio

Giovanni Gaudio

Ca' Foscari University of Venice; Bocconi University

Date Written: August 1, 2020


In the aftermath of the 2007-2008 financial crisis, flawed variable pay structures of executives were blamed by many for contributing to the build-up of the global financial turmoil, as they allegedly incentivized them to engage in excessive risk-taking. Legislators around the globe decided to regulate remuneration structures of the fat cats in the financial industry with a view to better align their compensation with effective risk management practices. Since 2010, several Directives have been adopted at EU level, imposing on financial institutions a combination of mandatory norms regarding how the variable part of remuneration is to be paid out. Although this topic has been widely investigated by corporate governance researchers, it has been largely neglected by labour law scholars. This article tries to fill this gap, analysing the issues of mandatory pay structure in the financial industry through the lenses of employment law. These peculiar mandatory norms can be interesting for labour lawyers for the following two reasons. First, because they establish a structural participative nexus between employers and their executives, contributing to set up novel possible forms of managerial democracy in financial institutions. Second, because these mandatory norms are characterized, as many employment norms, by inderogability. However, their structure is reversed. Rather than being unidirectional in favour of employees, they protect employers, due to the predominant public interest of safeguarding the stability and soundness of the financial system. The article concludes by analysing the role that norms regarding pay structure can play in the evolutionary process of employment norms’ inderogability.

Keywords: Financial Crisis, Executive Compensation, Executive Pay, Excessive Pay, Bonus, Fat Cats, CRD, Cor-porate Governance, Employment Law, Labour Law, Inderogability

JEL Classification: G2, G34, G35, J33, K31, M12, M52

Suggested Citation

Gaudio, Giovanni, Financial Crisis, Excessive Pay And Fat Cats: Why Employment Scholars Should Start Reflecting on Regulation of Executive Remuneration (August 1, 2020). Bocconi Legal Studies Research Paper No. 3681952, The Italian Law Journal (2020) 2 , Available at SSRN: or

Giovanni Gaudio (Contact Author)

Ca' Foscari University of Venice ( email )

Dorsoduro 3246
Venice, Veneto 30123

Bocconi University ( email )

Via Roentgen, 1
Milan, Milano 20136

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