Regulators May Force Wall Street To Defer Half Of Executives' Bonuses, Wall Street Journal Reports

(Reuters) - U.S. regulators will propose that major financial firms defer at least half of bonuses paid to top executives for at least three years, the Wall Street Journal cited sources as saying on Saturday.

The Federal Deposit Insurance Corp is expected on Monday to approve the draft rule, which seeks to force the largest financial firms -- including Bank of America Corp (BAC.N), JPMorgan Chase & Co (JPM.N), Goldman Sachs Group Inc (GS.N) and Morgan Stanley (MS.N) -- to tie incentive-based pay to individual employees' long-term performance, rather than just hand out large chunks of cash each year, the paper said.

Under the proposal, the firms would have to review the results of trades or other business decisions tied to an employee's bonus pay over the deferral period, the Journal cited people familiar with the discussions as saying.

If losses occur, the firms would have to reduce or eliminate the delayed compensation accordingly, it added.

The proposed rule also would instruct the boards of firms with more than $50 billion in assets to identify lower-rung employees who are capable of inflicting "material risk" on their company, the Journal said. The firms would have to defer a portion of bonus pay for these employees as well, it said.

The Dodd-Frank law, enacted in July, requires regulators to ban pay practices that encourage "inappropriate" risk taking. On Monday, banking agencies will release a rule to implement this section of the law.

The rule is expected to require a significant amount of executives' bonuses to be deferred over a number of years, similar to a proposal G20 leaders agreed to in 2009 in which the proposed period of deferral was at least three years.

That proposal also suggested 40 to 60 percent of bonus pay be deferred.

In June, a month before Dodd-Frank became law, banking regulators led by the Federal Reserve put out guidance on pay, suggesting compensation should not cause employees to take "imprudent risk" and that the board of directors should be involved in policing pay.

The rules to be released on Monday are expected to be more specific.

Some banks are already broadly in line with most of those terms, notably Morgan Stanley.

Copyright 2010 Thomson Reuters. Click for Restrictions.

Comments

[dizmo4]

05:38 PM on 02/07/2011

Why isn't this story in a more prominent place on HP?

[golfnut49]

05:24 PM on 02/07/2011

.....half......half.......how about when everyone who was layed off gets his/her job back then they might get a bonus........but not until then........and the bonus should be a turkey..........

[ConcernedAboutRFuture]

02:38 PM on 02/07/2011

It'll never happen.

[builderman55]

12:38 PM on 02/07/2011

Listen to them scream about this and remember: they are not losing homes, having to decide between health insurance or food, taking two or three minimum wage jobs to "put food on their families" (Dubya). No, they are having to defer HALF of their obscene bonuses. And they will scream bloody murder about the injustice of it. And these same people who brought us such innovations as mortgage backed securities, credit default swaps, etc. Ours is no longer a rational world; we are living in a Kafka novel...

[AgingLady]

10:52 AM on 02/07/2011

Hoe about cutting all my 'fees'

[mgrant33301]

10:45 AM on 02/07/2011

and the bankers got richer while the poor suffered. i suggest the banks should be regulated like hell since they have a social responsibility which they have completely ignored.

[NetLoa]

08:47 AM on 02/07/2011

This is a great idea. Now we just need to crank up the top marginal tax rates to about 65 percent or so.

[mgrant33301]

10:46 AM on 02/07/2011

or higher

[Mi4Peace]

11:10 AM on 02/07/2011

I agree

[ProfessorDuh]

06:35 AM on 02/07/2011

So they will just double the bonuses, I suppose.

[Akhil Khanna]

03:12 AM on 02/07/2011

What?????????
With food prices spiralling out of control you cut the bankers bonuses by half to only a few hundred million dollars.........
You want to starve the bankers to death or what??

I too would love to have a business where I can use other people's money to gamble in a casino and make huge bonuses when I win.

In case I loose big because of reckless gambling, I have friends in high places who would flush me with the money they collect from the rest of the town so that I can gamble again and make huge bonuses for myself again.

The rest of the town has been reduced to living on food stamps because of me and my friends is none of my concern.

http://www.marketoracle.co.uk/Article24581.html

[builderman55]

12:39 PM on 02/07/2011

Well said...

[McKeaton]

02:01 AM on 02/07/2011

So in three years from now, will see a big jump in profits at the banks for the criminals bankers' bonuses award?

[mamacat]

01:59 AM on 02/07/2011

"I succeeded in making my company too big to fail. Show me the money!"

[SitandStay]

01:41 AM on 02/07/2011

Someone should spraypaint their lawn with "scabs", because they have done a more sweeping demise of the American worker than scabs who do not honor the ethics of strikes.

[castlerider]

12:21 AM on 02/07/2011

It's the very least they should do.

[LeeCalif]

11:42 PM on 02/06/2011

And then again, regulators MAY NOT force Wall St. to defer bonuses.

[bleedingheart9]

11:28 PM on 02/06/2011

the regulators should be giving the bankers like J P Morgan more Kay Why because the way the banks are screwing over the common people, somebody's gonna need it, and we don't think it's JPM