The Washington PostThe Washington Post

How Washington allowed bank CEOs to pocket huge bonuses amid failure

By Jeff Stein and Daniel Gilbert

23 Apr 2023 · 7 min read

Editor's Note

Silicon Valley Bank and Signature Bank imploded in March, prompting a renewed focus on executive pay in the banking industry. The Post explores how U.S. authorities failed to act over the past decade.

The 44-page PowerPoint presentation to federal banking regulators was clear and direct: Letting companies pay their chief executives in stock that the CEOs could sell while still working for the companies risked disaster.

Years of research showed that the existing structure for paying Wall Street executives led them to take much bigger gambles with their institutions because they benefited from stock price increases, Sanjai Bhagat, a finance professor at the University of Colorado at Boulder, warned Securities and Exchange Commission attorneys and economists in a closed-door meeting in November 2016. The best fix would be to require top bank officials to hold any stock until one to three years after they left their companies, Bhagat told them. The idea was one of dozens of ways to change how bank CEOs are compensated that federal authorities spent years discussing.

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