CURBING RUNAWAY WALL STREET PAY: THE KEY ACTION ITEMS

What steps should be taken now to rein in runaway pay on Wall Street?

Click here to read the recommendations of John Wilcox, the chairman of Sodali, a director of ShareOwners.org, and the former head of corporate governance at TIAA-CREF.

Wilcox posted his thoughts Friday on the Harvard Law School Forum on Corporate Governance and Financial Regulation. Here is an excerpt:

“How can we bring rationality back to executive compensation at America’s public companies (and, for that matter, to Wall Street)? The answer ultimately depends on our ability to tackle the bigger problem: How can we restructure the U.S. financial system to disentangle Wall Street, corporate America and the federal government?

As Congress continues to grapple with these questions, here are five steps that should be considered:

1. Wall Street firms should voluntarily segregate speculation and proprietary trading and convert these activities back into private ownership structures, thereby reducing the risk exposure of long-term investors and keeping investment bankers’ compensation out of the public record.
2. Too-big-to-fail financial institutions should be restructured or broken up to reduce both systemic risk and moral hazard.
3. Congress should enact new legislation, building on the principles of Glass-Steagall, to segregate commercial and investment banking and to clarify fiduciary standards governing investment of long-term assets.
4. Regulatory and accounting reforms should compel both corporations and financial intermediaries to increase transparency.
5. Corporate boards should strengthen oversight of risk management and executive compensation and be fully accountable to shareholders.

These reforms would help reign in corporate pay, take some of the pressure off Wall Street and stabilize our financial system.”

Make sure to check out the full text at the above link!