The high-voltage issue of banker and other executive compensation is still seen by some as a matter for corporate, rather than government, reform.
Some voices at the World Economic Forum annual meeting here in Davos, Switzerland, have made that point. There’s also been some dissent to the notion that paying out bonuses in company stock that vests only after a number of years will reduce excessive risk-taking.
Executive compensation as the responsibility of a company’s board of directors is a “central tenet” of corporate organization, said Robert Greifeld, chief executive of NASDAQ OMX Group, said in a Wednesday interview at the outskirts of the Davos meeting.
He said evolving pay structures won’t be “one flavor for all,” and answers need to be nuanced. Like others, Greifeld noted that Lehman Brothers and Bear Stearns both had high levels of employee ownership through share holdings.
That fact gives some pause to the emerging idea that shares used as compensation will directly reduce unwanted risk-taking. The whole notion of what level of risk-taking is warranted in banking or the corporate world more generally is itself no settled issue.
At a panel session today, Timothy P. Flynn, chairman of KPMG International, said bankers are in the process of reforming their business, from reassessing risk to modifying compensation practices. While not done, he said a “lot of progress” has been made since last year.
Lord Levene, chairman of Lloyd’s, said Wednesday that remuneration was not the cause of the credit crisis and that the industry has to deal with the issue itself.
A different view was offered this morning by John Monks, general secretary of the European Trade Union Confederation. He cited the growing gap between the compensation of top executives and average employees.
People are now saying “what about us,” Monks said, after Western governments bailed out financial institutions. The voters want to know what government has planned to help them.
He said this year promises to be “miserable” in a lot of countries, where economies already suffering high unemployment will face constraints imposed by already high debt levels created by spending to resolve the credit crisis and fight recession. There may be government spending cuts and tax increases, Monks said.
Monks said a broad discussion about the system needs to still be had. He said a short-term perspective still holds sway among businesses and investors.
He cited a conversation with a hedge fund manager in which the manager asserted he had long-term investments. They were short-term investments gone bad that couldn’t be liquidated.