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The impact of regulations on executive compensation in the US financial institutions

Author

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  • Agnieszka Slomka-Golebiowska

    (Warsaw School of Economics)

Abstract

The purpose of this article is to present the path dependence of regulation as an important engine of evolution of executive compensation in the US financial institutions. In particular, the impact of regulations, including tax laws, accounting principles and disclosure requirements of public companies on the practice of rewarding executives of the US banks is examined. The regulatory changes contributed to the fact that executive compensations since 90s. are the highest in the world due to commonly used stock options that are the largest component of executive pay. Combining no accounting expense on the company’s books, but a large deduction for tax purposes stock options virtually exploded. The dynamic rise of executive compensation was not halt by routinely expanded by SEC disclosure requirements. The regulations, developed in good faith, caused a number of unintended and costly side effects. The nature of regulation introduced in the United States was more disciplining than constructive due to the fact that they were initiated by politicians who are guided by a political agenda rather than the value for bank's shareholders and other stakeholders.

Suggested Citation

  • Agnieszka Slomka-Golebiowska, 2014. "The impact of regulations on executive compensation in the US financial institutions," Ekonomia i Prawo, Uniwersytet Mikolaja Kopernika, vol. 13(1), pages 175-194, March.
    • Handle: RePEc:cpn:umkeip:v:13:y:2014:i:1:p:175-194
    DOI: 10.12775/EiP.2014.014
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    More about this item

    Keywords

    corporate governance; executive compensation; banks; US; path dependency;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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