Trends in Executive Compensation across Bank Types
Responsible Finance and Digitalization: Implications and Developments, pp. 24–45, 2022
Posted: 22 Sep 2022
Date Written: September 5, 2022
In this chapter, we present a descriptive analysis of executive compensation in U.S. banks over the period 1992-2018. Specifically, using detailed data on the compensation of the Chief Executive Officers (CEOs) of the S&P 1500 banks, we examine the development trends in the level and structure of bank CEO compensation over time. Moreover, we also assess differences in CEO compensation levels and structures across banking organizations with different types of business models. Our key findings can be summarized as follows: (1) The level of CEO total compensation varies considerably over time. (2) The total compensation of bank CEOs decreased substantially around the global financial crisis and has not yet exceeded the pre-crisis levels despite the systematic increase over the last decade. (3) Bonuses and other types of incentive compensation items comprise a vast proportion of bank CEO compensation. (4) The base salary of bank CEOs has remained relatively constant over time. (5) Both the level and the composition of CEO compensation differ across bank types with the CEOs of investment banks having the highest pay and the highest proportion of performance-based compensation items after controlling for bank size, capital ratio, and financial performance. (6) The structure of bank CEOs’ incentive compensation has largely shifted from options towards restricted stock in the aftermath of the financial crisis.
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