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Corporate Governance

: The Harvard Law School Corporate Governance Blog

Regulators Issue Final Guidance on Banking Incentive Compensation

By Harvard Law School Program on Corporate Governance

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Editor?s Note: H. Rodgin Cohen is a partner and chairman of Sullivan & Cromwell LLP focusing on acquisition, corporate governance, regulatory and securities law matters. This post is based on a Sullivan & Cromwell client memorandum relating to banking incentive compensation guidance. Research by the Program on Corporate Governance dealing with regulation of financial firms' pay structures by bank regulators includes Regulating Bankers' Pay, by Lucian Bebchuk and Holger Spamann, which was discussed on the Forum here, as well as in Lucian Bebchuk?s testimony in two hearings before the House of Representatives, which are available here and here. Recent Program research on how pay should be designed to reduce risk-taking incentives also includes Paying for Long-Term Performance by Lucian Bebchuk and Jesse Fried, discussed here.

On June 21, 2010, the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the Office of Thrift Supervision and the Federal Deposit Insurance Corporation jointly issued comprehensive final guidance designed to ensure that incentive compensation policies do not undermine the safety and soundness of banking organizations by encouraging employees to take imprudent risks. The Guidance finalizes the proposal issued by the Federal Reserve in October 2009.

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Full post as published by The Harvard Law School Corporate Governance Blog on July 20, 2010 (boomark / email).