Compensation Expert Witness On Bank Executive Compensation Part 1

Compensation expert witness Dr. Sanjai Bhagat presented his paper Bank Executive Compensation And Capital Requirements Reform this month to the Board of Governors of the Federal Reserve System, Washington DC.

Abstract Part 2:
We study the executive compensation structure in the largest 14 U.S. financial institutions during 2000-2008. We focus on the CEO’s buys and sells of their bank’s stock, purchase of stock via option exercise, and their salary and bonus during 2000-2008. We consider the capital losses these CEOs incur due to the dramatic share price declines in 2008. We consider the shareholder returns for these 14 banks. Finally, we consider three measures of risk-taking by these banks: (a) the bank’s Z-score, (b) the bank’s asset write-downs, and (c) whether or not a bank borrows capital from various Fed bailout programs, and the amount of such capital.

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