Finance sector wages: explaining their high level and growth

Joanne Lindley, Steven McIntosh 21 September 2014

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Individuals who work in the finance sector enjoy a significant wage advantage. This wage premium has received increasing attention from researchers following the financial crisis, with focus being put onto wages at the top of the distribution in general, and finance sector wages in particular (see Bell and Van Reenen 2010, 2013 for discussion in the UK context). Policymakers have also targeted this wage premium, with the recent implementation of the Capital Requirements Directive capping bankers’ bonuses at a maximum of one year of salary from 2014.

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Topics:  Financial markets Microeconomic regulation

Tags:  Bankers’ bonuses, banking, wages, Inequality, UK, regulation, asymmetric information, Executive compensation, Finance, task-biased technological change, ICT

Reforming CEO pay: Focus on the right dimensions

Alex Edmans 11 September 2014

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Executive pay is a high-profile topic on which almost everyone has an opinion.  Many shareholders, workers, and politicians believe that the system is broken and requires a substantial overhaul.  Despite being well-intentioned, their suggested reforms may not target the elements of pay that are most critical for shareholder value and for society.

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Topics:  Financial markets Labour markets

Tags:  executive pay, corporate governance, Executive compensation, CEOs

Through the looking glass: CEO pay in China's listed companies

Alex Bryson, John Forth, Minghai Zhou 24 June 2014

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For many in the West China remains a paradox: a single-party Communist state with a vibrant, thriving economy set to challenge the US in the coming decade. Some have questioned the sustainability of the Chinese growth miracle in the absence of fully-fledged democracy and root-and-branch market reforms. But others point to state-sponsored decentralised market reforms over the past three decades as the key to China's success (Xu 2012).

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Topics:  Financial markets Labour markets

Tags:  China, executive pay, corporate governance, Executive compensation, CEOs

Say on pay in the UK: Modest effect, even after the crisis

Ian Gregory-Smith, Steve Thompson, Peter Wright 24 March 2014

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The extensive academic literature on the growth of executive compensation has tended to polarise around one of two positions: the rents-capture view and the optimal contracting approach. These analyses lead to very different positions on the value of a ‘say on pay’ policy:

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Topics:  Frontiers of economic research Labour markets Microeconomic regulation Poverty and income inequality

Tags:  voting, UK, executive pay, corporate governance, Executive compensation

Incentive accounts: A solution to executive compensation

Xavier Gabaix , Alex Edmans 24 June 2009

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In an influential book, Bebchuk and Fried (2004) argued that executive compensation is set by managers themselves to maximise their own pay, rather than by boards on behalf of shareholders. Indeed, many commentators argue that executives’ pay schemes were major contributors to the financial crisis, encouraging them to take on too much risk and manage their company for short-term profit. In response, President Obama has proposed new executive compensation rules for firms seeking government aid.

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Topics:  Microeconomic regulation

Tags:  incentives, Executive compensation

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