Last week’s announcement by President Obama and the U.S. Treasury imposing new executive compensation limitations on those receiving federal aid was not an isolated occurrence. Many countries are targeting excessive executive compensation as part of the latest round of bank recapitalization and support initiatives.
Last month, France announced that in order to participate in the second tranche of its bank recapitalization plan, executives must forgo 2008 bonuses. The U.K. Treasury today announced that it will conduct an independent review of corporate governance of the U.K. banking industry. In particular, the review will “examine board management of risk (including the effectiveness of risk and audit committees), incentives to manage risk in bank remuneration policies, the competences needed on bank boards, board practices and structures, and the role played by institutional shareholders.” Similarly, the German Chancellor stated last week in an interview that she will consider limits on salaries and bonuses given to executives who receive capital from the government. These efforts are likely to gain increasing support in coming weeks.