“The Fed’s proposal to regulate compensation is another nail in the coffin of independence of the Federal Reserve,” says Stuart Greenbaum, former dean and professor emeritus, Olin Business School, Washington University in St. Louis. “If we are going to regulate bank executives’ compensation, it would be advisable to strip away the Fed’s supervisory and regulatory functions completely.”
The Fed’s proposal is reportedly closely aligned with European bank regulations to be discussed at the Group of 20 world leaders summit this week in Pittsburgh. Greenbaum cautions that if regulations are to be effective, they need to take into account total compensation, not just the composition or structure of pay packages. “The Fed’s claim to look at structure only and not total compensation is misguided in that total compensation has a clear impact, perhaps even greater than structure, on incentives for risk taking.”
Professor Greenbaum has served on the staffs of the Comptroller of the Currency and the Federal Reserve.
Greenbaum bio: http://www.olin.wustl.edu/facultyandresearch/Faculty/Pages/FacultyDetail.aspx?username=greenbaum
To schedule an interview with Stuart Greenbaum, please contact: Melody Walker, melody_walker@wustl.edu