Executive Bonuses

Dan Doctoroff talks about the need for changes to the existing structure.

Question: Should banks keep the bonus structure intact?
 
Dan Doctoroff: Well, I think in tact the way it has been exactly, the answer is no. There is a general recognition that tying more closely, paid to performance is absolutely critical. And financial institutions got away from that, paying over the short term when there were real long term liabilities or risks.
I don't think you'll see that happening and going forward and I imagine you'll see some form of regulation, self-regulation in that direction which virtually everyone aggress with. I think when you try to put arbitrary caps on things, you are going to fail and when you try and restrict, make things more restrictive for one institution compared to another, you simply put the ones that have their restrictions at a competitive disadvantage, they will lose people, there is absolutely no doubt about it, you've already start to see that happen right now and all you do is make the problem worse and unfortunately those are going to be the institutions where the government has the largest investment.
So if the government wants to recover its money and see a broad based recovery as well, that's not just lead where lending is occurring from a number of institutions, we're going to have to treat pretty much every institution the same way.
 
Recorded on: April 30, 2009
 

Question: Should banks keep the bonus structure intact?
 
Dan Doctoroff: Well, I think in tact the way it has been exactly, the answer is no. There is a general recognition that tying more closely, paid to performance is absolutely critical. And financial institutions got away from that, paying over the short term when there were real long term liabilities or risks.
I don't think you'll see that happening and going forward and I imagine you'll see some form of regulation, self-regulation in that direction which virtually everyone aggress with. I think when you try to put arbitrary caps on things, you are going to fail and when you try and restrict, make things more restrictive for one institution compared to another, you simply put the ones that have their restrictions at a competitive disadvantage, they will lose people, there is absolutely no doubt about it, you've already start to see that happen right now and all you do is make the problem worse and unfortunately those are going to be the institutions where the government has the largest investment.
So if the government wants to recover its money and see a broad based recovery as well, that's not just lead where lending is occurring from a number of institutions, we're going to have to treat pretty much every institution the same way.
 
Recorded on: April 30, 2009