June 18, 2010
Executive Pay and Risk
– Mark Poerio, Paul Hastings
A few days ago, the Financial Times included a thought-provoking article about how leverage and debt in the banking sector make stock price a risk-filled measure for executive pay. The article cites a paper titled “Executive Compensation and Risk Taking” that was recently presented at Columbia University. Overall, I suspect we will be seeing a healthy sophistication in the analysis of how business operations connect to the structuring of executive compensation. The best decision-makers will need to facilitate this dialogue in order to assure that the incentives they approve will reflect the desired balance between business objectives and risk tolerance.