Damned if You...Don't: Bank Directors Called to Account for Incentive Compensation
By Mark Poerio
Over the past 18 months, U.S. and global governments and regulators have been consistent in their identification of the general principles by which to better structure executive compensation. There is near universal agreement that incentives should reflect long-term performance, that ill-gotten gains should be subject to forfeiture or clawback, that decisionmakers should be independent, and that imprudent risk-taking should be discouraged through intelligent program design. The move from generalities to specifics has now come for U.S. financial institutions, from their primary regulators. The Federal Deposit Insurance Corporation (FDIC), the Board of Governors of the Federal Reserve System (Federal Reserve Board), the Office of the Comptroller of the Currency (OCC), and the Office of Thrift Supervision (OTS) (together, the Regulators), have jointly issued "Guidance on Sound Incentive Compensation Policies" (the 2010 Guidance), effective June 25, 2010.