Tag Archives | executive

Bank Pay Worse?

According to a soon to be released report by The Corporate Library for CII, some financial firms actually rewarded executives after the crisis with “massive salary increases,” including four Wells Fargo & Co. officials who saw their base salary at least triple from 2008 to 2009, according to the report. Wells Fargo, Citigroup Inc. and Bank of America Corp. each “exploited a loophole” in rules triggered by the Treasury Department’s bailout of financial firms in late 2008 by paying salaries ranging from $3.3 million to $9.9 million, the report added.

The group recommended that U.S. financial firms tie pay even more closely to future performance. The practice is more common at non-U.S. banks, where bonuses depend on whether an employee maintains his performance. Mr. Hodgson also suggested that clawback provisions be toughened beyond the material loss, fraud or earnings restatements that trigger them now.

via Did New Rules Worsen Pay Situation? – WSJ.com, 10/29/2010.

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Pay Without Performance

PayWithoutPerformancePay without Performance: The Unfulfilled Promise of Executive Compensation was the best book published in 2004 in the field of corporate governance. Lucian Bebchuk and Jesse Fried focus on one aspect of corporate governance, executive pay, and clearly demonstrate that many features of executive pay are better explained as a result of shear managerial power, rather than arm’s-length bargaining by boards of directors. After thoughtful analysis, they find “systematic use of compensation practices that obscure the amount and performance insensitivity of pay, and the showering of gratuitous benefits on departing executives.” The cost of current corporate governance systems is weak incentives to reduce managerial slack or increase shareholder value and “perverse incentives” for managers to “misreport results, suppress bad news, and choose projects and strategies that are less transparent.” Continue Reading →

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