Rethinking “Strength of Incentives” for Executives of Financial Institutions, Journal of Applied Corporate Finance, Summer 2010
by John McCormack, Morgan Stanley, and Judy Weiker, Manewitz Weiker Associates
The failure of several large financial institutions in 2008 and 2009 has led to a general reassessment of incentive compensation policies at financial institutions. Much public indignation has been directed at the CEOs and other senior managers of now bankrupt or government-rescued institutions who received large sums in the years just prior to the crisis. Both the sheer size of executive compensation and the jarring contrast between massive shareholder losses and enormous executive pay at the same enterprises have been hot political issues. Adding more fuel to the controversy, the last decade saw many well-publicized cases involving very high levels of cumulative executive compensation in companies that produced disappointing cumulative shareholder returns.
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