So say Paul Hodgson, Greg Ruel and Michelle Lamb authors of Wall Street Pay: Size, Structure and Significance for Shareowners (link) from the Council of Institutional Investors.
I'm surprised if you're surprised. Sample para:
"In the wake of the financial crisis, the structure of compensation on Wall Street has improved. Positive changes include:
- Substantially improved clawback provisions
- Longer deferral periods for pay, especially equity
- An increase in equity as a proportion of compensation
- A rebalancing of the fixed pay/variable pay mix to mitigate risk taking
Despite these beneficial changes, none of the banks in the study has addressed adequately the importance of tying compensation to long-term value growth. Some banks have increased fixed pay excessively. And the effectiveness of the banks’ stronger clawback provisions has not been tested."
The report has several ideas for improving matters. Unfortunately, none of these include the notion of tying compensation to creditors' long-term interests as well as those of owners of equity. Perhaps they thought the one follows the other.
But, as the report itself notes, better long-term incentives existed pre-crisis in many non-US banks. Yet they too - last time I checked - did not escape pain.
Sadly, a long, strong course of bonusoxifren that might nurture the principle of selling less to and investing more for clients looks a medicine (yet?) too bitter to stomach.
Cropped image is by RJ Matson and can be viewed in full (and purchased on the St Louis Today website