Virtus InterPress

Executive compensation in banks

PROJECT TITLE: CLAWBACK OF BONUSES AS THE NEW REALITY OF EXECUTIVE COMPENSATION IN WORLD’S LARGEST BANKS

THE PROJECT CONTENT

The current post-crisis status of most world countries leads to paying more attention to improving of risk governance functions. It is mostly concerned to banks because of the risky nature of their business. Before the crisis the executive compensation in most banks was excessive that, in turn, lead to systemic risk growth. According to transaction cost theory bank governance is focused at effective accomplishment of bank transactions. In connection to the above theses the important task at the time is improving the system of executive remuneration in order to ensure the lower bank risk level. With this aim in 2008 Swiss bank UBS has implemented new compensation system that assumes the clawback provision. This clause concerning the deferred awards of senior managers’ remuneration is included to increase their accountability for loss-creating or fraud behavior. The paper will investigate the aftermath of clawback of executive compensation implementation in biggest European banks. Furthermore, after implementation of the clawback provision in leading banks of Europe similar practice has been started in financial institutions of USA, specific of which will be researched in the paper.

Project outcome: paper, which will be presented during a scientific conference in Milan - May 8, 2014

THE PROJECT DEADLINES

Results of the joint research are planned to be presented on the International scientific conference "Corporate Governance: a Search for Advanced Standards in the Wake of Crisis" in Milan (Italy) on May 8, 2014

THE PROJECT COORDINATOR Olga Afanasyeva (Ukraine)

CONTACT PERSONS Olga Afanasyeva, PhD, International Center for Banking and Corporate Governance, Ukrainian Academy of Banking of the National Bank of Ukraine (Ukraine) (e-mail: o.b.afanasyeva@virtusinterpress.org)

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