IDEAS home Printed from https://ideas.repec.org/a/pal/jbkreg/v18y2017i4d10.1057_s41261-016-0027-7.html
   My bibliography  Save this article

The hubris of excessive remuneration in the financial sector: The case for regulation

Author

Listed:
  • Imad A. Moosa

    (RMIT)

Abstract

A case is put for the regulation of excessive remuneration in the financial sector in its three forms: basic pay, bonuses and golden parachutes. It is suggested that the financial sector commands a big portion of corporate profit that is disproportional to its share of the economy, which invalidates the profitability argument for big pay. It is demonstrated that bonuses and golden parachutes have nothing to do with performance and that for too-big-to-fail institutions, bonus payments are more strongly correlated with bail-out money than performance, no matter how performance is measured. The arguments against the regulation of remuneration are rebutted. It is concluded that a radical solution to the problem associated with big pay is to place the financial sector where it should be by putting an end to excessive financialisation.

Suggested Citation

  • Imad A. Moosa, 2017. "The hubris of excessive remuneration in the financial sector: The case for regulation," Journal of Banking Regulation, Palgrave Macmillan, vol. 18(4), pages 287-301, November.
    • Handle: RePEc:pal:jbkreg:v:18:y:2017:i:4:d:10.1057_s41261-016-0027-7
    DOI: 10.1057/s41261-016-0027-7
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1057/s41261-016-0027-7
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1057/s41261-016-0027-7?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Imad A Moosa, 2016. "Contemporary Issues in the Post-Crisis Regulatory Landscape," World Scientific Books, World Scientific Publishing Co. Pte. Ltd., number 10024, January.
    2. Dietl Helmut M & Duschl Tobias & Lang Markus, 2011. "Executive Pay Regulation: What Regulators, Shareholders, and Managers Can Learn from Major Sports Leagues," Business and Politics, De Gruyter, vol. 13(2), pages 1-32, August.
    3. Kevin Dowd, 2009. "Moral Hazard and the Financial Crisis," Cato Journal, Cato Journal, Cato Institute, vol. 29(1), pages 141-166, Winter.
    4. Frank Levy & Peter Temin, 2007. "Inequality and Institutions in 20th Century America," NBER Working Papers 13106, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jan Libich & Liam Lenten, 2022. "Hero or villain? The financial system in the 21st century," Journal of Economic Surveys, Wiley Blackwell, vol. 36(1), pages 3-40, February.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Till Treeck, 2014. "Did Inequality Cause The U.S. Financial Crisis?," Journal of Economic Surveys, Wiley Blackwell, vol. 28(3), pages 421-448, July.
    2. Nikos Koutsiaras, 2010. "How to Spend it: Putting a Labour Market Modernization Fund in Place of the European Globalization Adjustment Fund," Journal of Common Market Studies, Wiley Blackwell, vol. 48(3), pages 617-640, June.
    3. Torregrosa-Hetland, Sara, 2016. "Sticky Income Inequality In The Spanish Transition (1973-1990)," Revista de Historia Económica / Journal of Iberian and Latin American Economic History, Cambridge University Press, vol. 34(1), pages 39-80, March.
    4. Xavier de Souza Briggs, 2014. "Looking Back and Looking Ahead: CDBG and the Future of Federal Urban Policy," Housing Policy Debate, Taylor & Francis Journals, vol. 24(1), pages 303-309, January.
    5. Justyna Przychodzen, 2012. "The economic costs of economic risk in the financial market (Europejskie rynki finansowe w obliczu globalnego kryzysu)," Problemy Zarzadzania, University of Warsaw, Faculty of Management, vol. 10(39), pages 54-63.
    6. Carola Frydman & Dirk Jenter, 2010. "CEO Compensation," Annual Review of Financial Economics, Annual Reviews, vol. 2(1), pages 75-102, December.
    7. Nicolas Cachanosky, 2014. "The Mises-Hayek business cycle theory, fiat currencies and open economies," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 27(3), pages 281-299, September.
    8. Mario Amendola & Jean-Luc Gaffard & Fabrizio Patriarca, 2017. "Inequality and growth: the perverse relation between the productive and the non-productive assets of the economy," Journal of Evolutionary Economics, Springer, vol. 27(3), pages 531-554, July.
    9. Acheson Graeme G. & Hickson Charles R & Turner John D, 2010. "Does Limited Liability Matter? Evidence From Nineteenth-Century British Banking," Review of Law & Economics, De Gruyter, vol. 6(2), pages 247-273, December.
    10. Rebitzer, James B. & Taylor, Lowell J., 2011. "Extrinsic Rewards and Intrinsic Motives: Standard and Behavioral Approaches to Agency and Labor Markets," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 8, pages 701-772, Elsevier.
    11. Castro, Cesar D., 2015. "Riesgo sistémico en el sistema financiero peruano," Revista Estudios Económicos, Banco Central de Reserva del Perú, issue 29, pages 77-90.
    12. Jean-Luc Gaffard & Francesco Saraceno, 2009. "Redistribution des revenus et instabilité. À la recherche des causes réelles de la crise financière," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(3), pages 75-86.
    13. Peter Temin, 2016. "The American Dual Economy," International Journal of Political Economy, Taylor & Francis Journals, vol. 45(2), pages 85-123, April.
    14. Cauvel, Michael & Pacitti, Aaron, 2022. "Bargaining power, structural change, and the falling U.S. labor share," Structural Change and Economic Dynamics, Elsevier, vol. 60(C), pages 512-530.
    15. Fernández-Villaverde, Jesús & Drautzburg, Thorsten & Guerron-Quintana, Pablo A., 2017. "Political Distribution Risk and Aggregate Fluctuations," CEPR Discussion Papers 12187, C.E.P.R. Discussion Papers.
    16. Christopher Tsoukis & Frédéric Tournemaine, 2013. "Status In A Canonical Macro Model: Labour Supply, Growth And Inequality," Manchester School, University of Manchester, vol. 81(s2), pages 65-92, October.
    17. Campbell, Douglas L., 2013. "Relative Prices, Hysteresis, and the Decline of American Manufacturing," MPRA Paper 51723, University Library of Munich, Germany.
    18. Walter Paternesi Meloni & Antonella Stirati, 2021. "What has driven the delinking of wages from productivity? A political economy-based investigation for high-income economies," Working Papers PKWP2104, Post Keynesian Economics Society (PKES).
    19. Pedro Fandiño, 2022. "The role of social conventions on wage inequality: the Brazilian trajectory and the missed “Great Leveling”," Review of Evolutionary Political Economy, Springer, vol. 3(2), pages 435-455, July.
    20. Olivier Giovannoni, 2014. "What Do We Know About the Labor Share and the Profit Share? Part II: Empirical Studies," Economics Working Paper Archive wp_804, Levy Economics Institute.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:jbkreg:v:18:y:2017:i:4:d:10.1057_s41261-016-0027-7. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave-journals.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.