FDIC Takes Page Out of G-20, Executive Compensation Task Force Playbooks

by Gary Larkin, for Governance Center Blog at The Conference Board, January 13, 2010.

The FDIC’s decision Tuesday on a new insurance premium model for banks falls in line with what many are saying about executive compensation: It makes sense to tie executive compensation to risk alignment.

Specifically, the decision reflects some of the tenets of the G-20 and The Conference Board Task Force on Executive Compensation executive compensation principles.

The FDIC, led by Chairman Bair, voted 3-2 Tuesday during a contentious meeting to require those banks that don’t align their compensation system with risk management to pay a higher insurance premium to the regulator. “The FDIC is exploring whether the design of employee compensation programs should be considered as a factor in the risk-based pricing system,” according to a FDIC staff memo. The memo refers to Section 7 of the Federal Deposit Insurance Act, which requires the FDIC to establish a “risk-based” assessment system for depository institutions…(continue reading)

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