"The EU's proposed rules on pay are misguided - Financial Times" - 10 Oct 2010
The EU's proposed rules on pay are misguided - Financial Times
The EU’s proposed rules on pay are misguided
By David Benson
Published: October 10 2010 19:37 | Last updated: October 10 2010 19:37
Last Friday, the European Union published guidelines on bankers’ pay.
The aim is clear. Following the near-collapse of the global financial
system two years ago, the EU wants to minimise the chances of a similar
cataclysm by reducing systemic risk. To achieve this, they are targeting
high compensation and excessive risk taking.
Increased capital
requirements for banks to constrain risk are already on the table. But
last week’s proposals add plans to defer as much as 60 per cent of bankers’ bonuses by up to five years. Half of these bonuses would also be linked to bank share prices.
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Interesting editorial piece.
Basically, the writer comes to the conclusion that because Lehman and Bear Stearns had high levels of equity ownership and failed, holding equity is therefore a predictor of risk.
Let's just say I don't think that the conclusion on equity vs risk is this easy or this unequivocal.
Dan