Regulating Bankers’ Pay in the UK: A Political Economy Perspective
This seminar is part of the CBLP PGR seminar series, where postgraduate students present their work and answer questions about it. This is a free event but registration is required in advance. A light lunch will be provided.
After the financial crisis, in the pursuit of financial stability, the UK has been focusing on the ongoing regulatory reform of corporate governance in the banking sector, mainly emphasising on the issue of executive remuneration. In major industrialized countries, the issue of bankers’ pay was blamed for that the equity-based pay incentivized excessive risk taking and failed to link the managerial incentives to the sustainability and long-term profitability of banks. In the UK, the issue was even described as ‘rewards for failure’.
However, the criticized payment system was just based on the belief that the calculation of executive remuneration should rely on market prices. In a jurisdiction with the ideology of free market efficiency, will the sudden turn towards intense regulation be efficient in achieving the goal of financial stability? Is it just a technique in banking regulation? What are the roots of the UK regulator’s motivation in regulating bankers’ pay? Is there any political economy factor that may influence the regulatory reform?