Posts Tagged ‘risk management’

We Guessed It!

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Jamie Dimon won re-election to the JPM Board “by a landslide” of just under 68% of the votes ensuring that he will continue to hold the both the CEO and Chairman posts. We certainly are not surprised, and predicted this on our blog Now That’s a Tempest in a Teapot.
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Comment Master of risk who did God’s work for Goldman Sachs but won it little love

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Published in Financial Times, December 23, 2009 by John Gapper 

Under other circumstances, this would have been a year to savour in the long, rapid ascent of Lloyd Blankfein. Goldman Sachs, the investment bank he has led for three years, not only navigated the 2008 global financial crisis better than others on Wall Street but is set to make record profits, and pay up to $23bn (€16bn, £14bn) in bonuses to its 31,700 staff.
For Mr Blankfein, a scholarship boy from the Bronx whose first financial job at Goldman was selling gold coins in its commodities trading arm, has prospered to an extent that was implausible even 10 years ago, when it became a public company. Its influence has spread throughout the world, from New York and London to Shanghai and São Paulo.
A good slice of its success is attributable to Mr Blankfein, a tough, bright, funny (everyone remarks upon his unpretentious, wisecracking manner) financier who reoriented Goldman. Under his leadership, trading and risk-taking have pushed to the fore, reducing the influence of its investment banking advisers.

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Checking on Risky Pay

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Published in CFO December 18, 2009 by. Alix Stuart

If a compensation policy could be harmful to a company’s health, the Securities and Exchange Commission wants investors to know about it.
This week the regulator approved a laundry list of new disclosure rules that will apply to virtually all proxy statements issued next year. The centerpiece of the new rules is a mandate that companies explain the risks that their compensation practices pose if they are “reasonably likely to have a material adverse effect on the company.”
A carryover from the requirements originally imposed on recipients of the Troubled Asset Relief Program, the rule says companies must consider compensation risk for all employees, not just executive officers. “Accountability is impossible without transparency,” said SEC Chairman Mary L. Schapiro in a press release accompanying the decision.

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Shareholders Alone Can’t Correct ‘Too Big to Fail’

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Published in The Nation November 23, 2009 by Zach Carter

During a House Oversight Committee hearing in October, a rare bipartisan consensus appeared to be building around a strategy to rein in executive compensation.
US banks, shareholders actually want their executives to be rewarded for taking on excessive risk.
“We need to empower the stockholders of public companies to better manage the package of pay and the incentive packages of their key executives,” said Representative Darrell Issa of California, the panel’s ranking Republican.
“Some constraints on these companies are necessary to protect the safety and soundness of the entire financial system,” said committee chair Edolphus Towns, a Democrat from New York. “We need to give the shareholders a way to get this under control.”
But while reinforcing shareholder rights may solve other corporate governance problems plaguing the US economy, like sloppy board oversight and managerial incompetence, shareholders are not going to end the bloated pay practices that have sparked outrage over the past year.

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Lehman, Bear Officials Made $2.5 Billion, Study Says (Update1)

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Published in Bloomberg November 23, 2009 by Matt Townsend 
 
Lehman Brothers Holdings Inc. and Bear Stearns Cos. executives made $2.5 billion from 2000 to 2008, a sign pay policies may have encouraged risk- taking that doomed the companies, a Harvard University study said.
The top five officials at Lehman, which filed for bankruptcy in September 2008, received $1.03 billion in cash bonuses and proceeds from equity sales during the period, according to the report, “The Wages of Failure,” released today by Harvard Law School’s Program on Corporate Governance. Bear Stearns’s top executives made $1.46 billion in the years before JPMorgan Chase & Co. agreed to buy the firm in 2008.
Losses the executives suffered when the firms failed were outweighed by payoffs in the preceding eight years, the study said, concluding that the “standard narrative” that the meltdown of Lehman Brothers and Bear Stearns wiped out top executive’s wealth was incorrect and should be viewed skeptically in the debate over pay regulation.

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Pay-performance link works, study finds

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Published in Pensions & Investments November 12, 2009 by Barry B. Burr

The value of CEOs’ stock ownership in their own companies and their outstanding equity awards and bonus payouts fell 42% on average in 2008, larger than the median 34% decline experienced by a typical shareholder at those companies, according to a study released today by Watson Wyatt Worldwide, a consulting firm.
The 967 CEOs analyzed in the study about their company stock lost a combined $53.7 billion on that stock — roughly $55.5 million for the average CEO — in 2008, compared with $3.2 trillion for shareholders of the same set of companies, the study said.

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Reducing Incentives for Risk-Taking

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Published in The New York Times October 12, 2009

It is now widely accepted that compensation structures in financial firms should be devised to avoid excessive incentives for risk-taking and that doing so requires tying executive compensation to long-term results and preventing cashing out of large amounts of compensation on the basis of short-term results.

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Did Bankers’ Pay Add to This Mess?

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Published in The New York Times September 27, 2009 by Mark Hulbert

Proposals to cap the compensation of bank C.E.O.’s have gained traction lately as a means of heading off another financial crisis.  World leaders at the G-20 summit meeting last week in Pittsburgh agreed in principle to reform executive compensation, with the goals of reducing risk-seeking behavior and avoiding a future global credit shock.

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The Right Way To Reform Wall Street

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Published in Business Insider September 18, 2009 by Henry Blodget

The Fed has apparently gotten so frustrated with the Obama administration’s inability to bring change to Wall Street that it’s taking matters into its own hands–parachuting Fed regulators into the bowels of banks to make sure their compensation policies don’t encourage inappropriate risk-taking.

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The hypocrisy of the Fed

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Published in CNNMoney.com September 18, 2009 by Paul R. La Monica

The Fed, according to a Wall Street Journal report Friday, is said to be considering a plan that would allow regulators to closely monitor and even change the pay practices at financial firms in order to make sure that these companies aren’t encouraging excessive risk-taking.

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