How Bank CEO Compensation Changes in a Crisis

Damion R. McIntosh

This study examines U.S. bank compensation practices under distressed conditions as the recent crisis by analyzing publicly traded banks from 2003 to 2009. The findings demonstrate increased reliance on non-incentive pay due to the adverse effects of the crisis on incentive pay. Specifically, the results show real growth in CEO base salary despite the crisis. However, only small banks paid significantly higher base salary to offset the loss in cash bonus caused by deteriorating corporate performances during the crisis. Large banks did not experience similar offsetting effects. Evidently, banks changed their compensation practices in response to distressed conditions.