Published - march 2011

Compensation and Governance: Best Practices of Financial Institutions Post-Dodd-Frank

By Susan O'Donnell

A combination of regulatory, legislative and investor activism, accelerated by the prolonged economic downturn, has had unprecedented influence on pay programs and governance at financial institutions. Many longtime, common compensation practices are now perceived as potentially risky or insufficiently shareholder-friendly. At the same time, what were once internal Board and management deliberations about the details of executive pay programs are subject to additional disclosure and scrutiny by regulators, investors, media and public.

This article discusses emerging best practices to meet regulatory requirements and ensure sound pay and governance practices in this environment in five critical areas:

• Incentive Plan Design and Mitigating Risk
• Long-Term Performance Perspective
• Pay-for-Performance Alignment
• Shareholder Influences
• Increased Disclosure Requirements