Bank USA: The Challenge of Compensation after the 2008 Financial Crisis

Published 30 Jun 2009
Reference 5611
Topic Strategy
Region Global
Summary

The case is set in the financial services industry during the financial crisis of 2008/09 and discusses issues when deciding on "fair" compensation packages for both senior management as well as risk managers. How can banks justify multimillion dollar bonuses to top management, when the institution is showing a loss/accepting government money to survive? Can compensation packages be competitive and please both employees and shareholders at different stages of the cycle? The case highlights the industry's soul-searching and attempts to appease an outraged public and manage possible future stress situations better.

Teaching objectives

- Set the stage to discuss compensation practices within the financial industry. - Understanding the risks (and un-intended consequences) when designing compensation packages to encourage/discourage risk taking. - Highlight the issues when trying to satisfy different stakeholders within listed companies.

Keywords
  • Risk Management
  • Bonus and incentive payments
  • Best practices in compensation packages
  • Financial crisis 2008/ 2009
  • Incentivizing employees
  • Aligning Shareholder value with company interests
  • Regulatory involvement in Banks
  • Incentivizing Risk Managers
  • RD0509
  • AR0509
  • AR0809
  • Corporate Governance
  • Board Process and Remuneration at the Top