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Many of the details are still being worked out, including what constitutes risky compensation.
However, even if employees sometimes find risky compensation attractive, there is no reason that giving employees stock instead of options would not be just as effective.
Under the bill, federal regulators would write new rules to prevent "inappropriate or imprudently risky compensation practices" that could threaten the safety and soundness of major financial institutions.
The measure also gives regulators the authority to prohibit inappropriate or risky compensation practices for banks and other regulated financial institutions.
It's hard to believe that regulators are savvy enough about both pay packages and risky compensation incentives at financial companies to recognize when either or both have become dysfunctional.
This time around, lawmakers say they want to do two things: encourage shareholder participation in how pay packages are structured and awarded at their companies and enlist regulators to reduce risky compensation incentives.
Similar(52)
If the capital structure shifted to $39 of debt for every $1 of equity a hugely risky position his compensation would be paid as $19.5 million in fixed-income instruments and $500,000 in equity, and the CEO's attention to risk would be heightened.
This judgment does not dispute the fact that fund managers' compensation is risky.
When the opportunity exists for bank employees to profit through risky behavior, the negative compensation consequences of such violations would need to be significant to serve as a deterrent.
In the BusinessWeek interview, talking about the "Volcker Rule" to limit the scope and activities of big banks, or about risky leverage or executive compensation, he was conversant and comfortable.
Despite proposals to rein in risky banking activity and compensation in the United States, which could add to the list of changes they must make, Mr. McKillip and Mr. Lyublinsky are optimistic about the market and say they are eager to take on the likes of Goldman Sachs and foreign banks like Credit Suisse that did not receive government aid.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com