Vittoria Cerasi, Sebastian M. Deininger, Leonardo Gambacorta, Tommaso Oliviero, 07 August 2017

Since 2011, the Financial Stability Board (FSB) has implemented compensation principles and standards for executives and material risk-takers in many financial institutions. This column presents evidence that banks in jurisdictions that adopted them changed their compensation policies more than other banks. Compensation in these banks is less linked to short-term profits and more linked to risk, and the CEOs of risky banks now receive less in bonuses and other variable compensation than their peers at less risky banks.

Alex Edmans, 23 September 2016

During political campaigns, candidates often set their sights on CEO compensation as a target for potential regulation. This column considers the various arguments for regulating CEO pay and questions whether it is a legitimate target for political intervention. Some arguments for regulation are shown to be erroneous, and some previous interventions are shown to have failed. While regulation can address the symptoms, only independent boards and large shareholders can solve the underlying problems.

Esa Jokivuolle, Jussi Keppo, Xuchuan Yuan, 23 July 2015

Bankers’ compensation has been indicted as a contributing factor to the Global Crisis. The EU and the US have responded in different ways – the former legislated bonus caps, while the latter implemented bonus deferrals. This column examines the effectiveness of these measures, using US data from just before the Crisis. Caps are found to be more effective in reducing the risk-taking by bank CEOs.

Jean-Pierre Danthine, John Donaldson, 02 August 2008

Stock options increasingly dominate CEO pay packages. This column outlines when economic theory suggests that options-heavy compensation is in shareholders’ interests. The answer is that boards of directors are likely giving too many executive stock options.