PROFESSOR STULZ also notes that bank C.E.O.’s lost a lot of their own money during the credit crisis.
He and Professor Fahlenbrach studied 98 banks that were part of the Standard & Poor’s 1500-stock index at the end of 2006, relying on the government’s Standard Industrial Classification system to determine which companies to consider as banks.
They found that the C.E.O.’s of these banks lost more than $30 million, on average, of their investments in their own banks in 2007 and 2008, and that the executives who headed Bear Stearns and Lehman at the onset of the crisis lost close to $1 billion each.
“If the prospect of losing those amounts was insufficient to induce the firms’ C.E.O.’s to pursue different policies,” Professor Stulz says, “it’s extremely difficult to imagine any compensation reform package that contains incentives that would do the trick.”
Sunday, September 27, 2009
Banking compensation (part 2)
The NYT has an article on compensation in the banking sector.