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Unformatted text preview: The FDIC will vote on the rules on Monday and they have to be approved by other regulatory agencies, which is expected, given that staff from all of the agencies were involved in drafting the new rules. Over the last few years, many of the large financial service holding companies started doing versions of this deferred compensation already. For example, Morgan Stanley already defers about 60% of bonuses. Questions: 1. Should the government be deciding on the shape of compensation to reduce risks? Are there other ways to get banks to reduce risk? 2. Will the new rules encourage decision makers to take on fewer risks and take on the more long-term interests of the firm? 3. Will the large firms react by increasing base pay to offset some of the expected losses of bonuses? Won’t this misalign incentives to maximize profits or shareholder wealth by making pay less dependent on firm performance?...
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This note was uploaded on 07/02/2011 for the course FINA 465 taught by Professor Berger during the Spring '11 term at South Carolina.
- Spring '11