Thursday, October 8, 2009

Will limiting bankers risk-taking really fix it all?

This morning Dealbreaker linked to a NYTimes article that is worth reflection. Regulators around the world have identified what they think were the various boogey-men of this economic crisis, and are making an effort to reduce banker risk-taking, promote long-term perspective, and increase accountability. With that in mind, take into account:
Tie executives’ compensation to their company’s stock price.
Withhold big paydays for years. Claw back bonuses if things go wrong. And force risk-loving traders to gamble with their own money, not just their company’s. In fact, those strictures [sic] were part of a compensation plan that Merrill Lynch adopted voluntarily in 2006 — two years before the company collapsed into the arms of Bank of America. But the Merrill program, which was supposed to align its top employees’ pay with the company’s long-term performance, did not keep workers from taking risks that nearly sank the brokerage giant. And some of its senior executives still stand to collect millions of dollars in stock under the plan.
Hat-tip: Dealmaker.

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