Abstract
Banks are frequently excluded from studies on executive compensation and corporate governance even though they play a critical role in the economy. In this chapter, we examine whether and how compensation of CEOs and board members in UK banks differs from compensation practices in other firms, using a sample of UK banks, FTSE 100, and matched-sample firms. We also examine differences in individual characteristics of both executive and non-executive board members of banks and those in other firms. We find that, contrary to public perception, CEOs in banks receive lower total compensation than CEOs of other firms. However, their compensation packages are weighted significantly more towards short-term compensation than in other firms. We also find that non-executives in banks are more highly paid than those in other firms.
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Notes
- 1.
Submissions to the Treasury Select Committee, April 2009, http://www.publications.parliament.uk/pa/cm200809/cmselect/cmtreasy/144/144iii10.htm
- 2.
Firms in the United Kingdom typically have a unitary board of directors composed of both executive and non-executive directors. Executive directors, including the Chief Executive Officer (CEO), are commonly referred to in the United States as “inside” directors while non-executive directors are referred to as “outside” directors and in some jurisdictions as “supervisory” directors. For consistency, in this chapter we use the term “executive” and “non-executive,” the terminology of firms and regulators in the UK.
- 3.
This declined substantially during and after the financial crisis. However, banks still represented 16% of the market capitalization of FTSE 100 firms at the end of 2009 (Source: FTSE All-Share Index, 2006; 2009).
- 4.
We choose to include new directors in the sample with an indicator variable indicating that they are new, instead of excluding them from the sample, due to the number of observations that would be lost, though deleting these observations does not materially affect our results.
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Goh, L., Gupta, A. (2012). Directors in Banks: Compensation and Characteristics. In: Boubaker, S., Nguyen, B., Nguyen, D. (eds) Corporate Governance. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-31579-4_8
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