Results tagged “Chris Dodd” from Regulating Wall Street

A Reasoned Approach To Executive Compensation

by Thomas F. Cooley

The Dodd bill makes some important improvements to corporate governance.

Since the onset of the financial crisis there has been a huge hue and cry about executive compensation, particularly compensation on Wall Street. It isn't hard to understand why, and it would not have been unexpected to see financial reform legislation that took a heavy-handed approach to "reforming" compensation practices. Early on in the crisis there were proposals to impose an 80% tax on bonuses and proposals to cap compensation in absolute terms. Last week members of the Angelides commission, charged with investigating the causes of the financial crisis, pummeled former Citi executives Charles Prince and Robert Rubin for getting generous compensation while the firm essentially collapsed around them.

We saw much of the same reaction in the 1930s. There was a huge public outcry over the compensation of Eugene Grace, the president of Bethlehem Steel ( BHMMQ.OB - news - people ), when it was revealed that he received a base salary of $12,000 and a bonus of more than $1.6 million in 1929. That amounts to $150,000 salary in 2010 dollars with a nearly $20 million bonus.

In spite of periodic expressions of outrage, efforts to "reign in" executive compensation have so far been relatively muted. The major pending legislation--Sen. Dodd's "Restoring American Financial Stability Act of 2009"--makes some very cautious but important recommendations about compensation. There are four that are notable.

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Finance for the People

Getting Regulatory Reform Right

by Thomas F. Cooley and Ingo Walter

We are now at a critical juncture in the effort to revise the structure of financial regulation in the U.S. Senator Christopher Dodd, Chair of the Senate Banking Committee, after months of seeking a compromise that would generate bipartisan support, has put forward his own version of a reform bill. Predictably, we hear the chorus of the wounded argue that the bill will stifle the competitiveness of U.S. financial institutions, retard financial innovation, send jobs overseas and limit the abundant options consumers and businesses now enjoy. John Boehner, leader of the House Republicans, urged a conference of bankers to stand up to "punk staffers" advising his colleagues. That's amazing, given that the financial services industry has spent something like $1 million per member of Congress lobbying on financial reform issues, which by some estimates amounts to about five active lobbyists per Congressperson. To which we say, take a deep breath and try thinking beyond the end of your nose. What's good for the system is ultimately good for you.

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The Dodd-Frank Act, signed into law in July 2010, represented the most significant and controversial overhaul of the U.S. financial regulatory system since the Great Depression. Forty NYU Stern faculty, including editors Viral V. Acharya, Thomas F. Cooley, Matthew P. Richardson, and Ingo Walter, provide a definitive analysis of the Act, expose key flaws and propose solutions to inform the rules’ adoption by regulators, in a new book, Regulating Wall Street: The Dodd-Frank Act and the New Architecture of Global Finance (Wiley, November 2010).

About Restoring Financial Stability

Previously, many of these faculty developed 18 independent policy papers offering market-focused solutions to the financial crisis, which were published in a book, Restoring Financial Stability: How to Repair a Failed System (Wiley, March 2009).

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