Compensation: A political problem

Rulemakers are falling over themselves to introduce measures to link remuneration more closely with risk, in an effort to appease an irate public. But will their new rules work in practice, and will they have the desired effect of making compensation more risk-sensitive?

More ink has been spilled by the media, regulators and legislators on bank executive remuneration than any other topic since the start of the financial crisis in 2007. Now, a series of much-trailed global and national rules is being put in place to try to reduce or eliminate the systemic risks out-of-control bonuses caused for the global financial world. One thing is in no doubt – the changes that have taken place so far in the pay packets of high-earning bank executives, in anticipation of