Bankers' remuneration reforms and new challenges

In: Corporate governance: an international review, Band 31, Heft 1, S. 161-177

Abstract

AbstractResearch Question/IssueThe desire to structure bankers' remuneration in a way that it is risk sensitive and aligned with the long‐term incentives of their institutions was at the center of the post Global Financial Crisis (GFC) regulatory reforms. A decade later, it is unclear whether the reforms achieved what they were intended for and whether they have resulted in some unintended consequences. The issue of unintended consequences is particularly important given that the banking sector needs to embrace technological innovation (Fintech) and the sustainable banking agenda.Research Findings/InsightsWe are still far from understanding the real costs and benefits of the remuneration reforms because it is difficult to isolate the impact of remuneration restrictions from the impact other regulations and policies had on restricting risk taking, banking structures and bonus culture. However, even if it is questionable whether the remuneration reforms contributed significantly towards improving the stability of the banking sector, they seem unsuitable for promoting Fintech and the sustainable banking agenda.Theoretical/Academic ImplicationsThe post‐GFC remuneration reforms may not sufficiently align bankers with stakeholders' interests which is essential to promote adoption of Fintech and sustainable banking agenda.Practitioner/Policy ImplicationsThe lack of in‐depth understanding of the effects of the remuneration reforms creates a barrier to understand the impact of the reforms on how banks innovate to adopt Fintech and the sustainable banking agenda. If the existing remuneration regulation limits the openness to innovation and strategic change, then the regulation needs to be revisited and modified.