Risk-adjusted measures of compensation work only if risk is being measured properly, for example, and the industry has proved how unsafe an assumption that is.
For corporate executives, the primary agency risk stems from compensation.
The ramifications for public company boards of the reawakened and newly charged SEC are numerous, particularly in the areas of risk management, compensation, shareholder communications and director qualifications, among others.
Greater confidence has driven down yields as investors needed less compensation for risk.
The same problem exists if the GSEs were reconfigured as for-profit companies but with tighter limits in areas like risk exposure and executive compensation.
He now concedes that the Fed's success in delivering low inflation and interest rates may have made bubbles more likely, ironically, because investors are demanding less compensation for risk.
The postcrisis business climate for investment banks, with restrictions on compensation and risk taking, makes selecting those who will take the top spots at a company even more important, said Roy Smith, a professor at New York University's Stern School of Business and a former Goldman partner.
After all, part of the long-term return from investments is compensation for the risk of investing in uncertain times.
Both spreads represent compensation for undertaking risk of one kind or the other.
Investors require compensation for the risk that market conditions will be unfavorable at a time when they need to sell their high yield bonds.
They ought to demand extra yield as compensation for the risk.
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The disclosure must state that such compensation may induce the advisor to assume a greater amount of risk than the advisor might otherwise assume without performance-based compensation.
Meanwhile, director compensation is more at risk than ever amid stock ownership thresholds and holding requirements.
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Conversely, is there a risk that ignoring this area of compensation will have a negative impact on morale or talent development?
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Given a severe shortage of labor in China, it is likely that Foxconn would ensure that workers are happy with their compensation and avoid the risk of them leaving, he said.
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In June, the Federal Reserve, joined by the Office of Controller of the Currency, the Federal Deposit Insurance Corporation and the Office of Thrift Supervision, issued final guidance to promote and ensure sound incentive compensation and avoid imprudent risk-taking.
Isn't a risk management process integrated with the incentive compensation process an obvious improvement?
As the Bank of France pointed out, the bonus plan complies with rules introduced in February at the behest of Christine Lagarde, the finance minister, to ensure that the structure of bankers' compensation does not encourage excessive risk-taking.
Paradoxically, the court cited the less invasive nature of bone marrow donation to support their decision when, in reality, it should be the more risk that is undertaken the higher the compensation (as it is for many other endeavors).
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This reform will curb excessive risk-taking, reduce leverage, reform compensation, protect consumers, bring transparency and more competition to derivatives markets, address the problem of firms that are too big to fail, and make sure taxpayers do not bear the costs when firms do fail.
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Risk--in this case for workers' compensation liability--got passed from hand to hand in a game of hot potato.
Without the individual compensation payments previously available, many families risk real hardship.
"We want to target compensation to people who are at the greatest risk, " Bush said.
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With no downside risk, most people would jump at the chance for additional compensation, but the reality is the raise was there all along.
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The unfortunate thing is that the employees of this company could risk their jobs by joining in on any media outcry of excessive compensation by any of its executives.
Deferred cash compensation makes employees debt holders, so it ought to reduce risk-taking.
The thinking went that executive compensation in the period leading up to the crisis encouraged excessive risk-taking, with well-paid employees getting all the reward and the federal government saddled with the costs of the aftermath when things went horribly wrong.
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Thus, Mr Davies argues, compensation arrangements are an important part of a company's overall risk-management strategy.
The AIG mess, then, is the result of denial about the level of risk, arrogance that the triple A credit rating is an absolute safety belt, greed about compensation that leads to reckless behavior and overall, a level of irrationality that approached insanity.
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