Elgar Financial Law series
Chapter 1: Introduction
We are now six years from the peak of the worst financial crisis for several generations. Scores of books, articles and reports, and millions of pages of copy have been produced by the printed press detailing the mishaps, blunders and greed which characterised the lead-up to the Global Financial Crisis (GFC) which caused it. Much of the literature has centred on the role of executive compensation in causing – at least partially – the collapse of hundreds of financial institutions, and the near death of the global financial system. The cascade of recent crises would suggest that something is clearly wrong with Western corporate governance and, by extension, with the way in which corporate executives are rewarded. Concentrating on the size of bankers’ pay, and the supposed perverse incentives that massive bank executive compensation packages generated, has become de rigeur in many popular and policy-making circles. Criticism of the supposed outsized pay of bankers and other senior employees of financial institutions merely intensified once the effects of the GFC on national economies became clear. Governments assumed the burden of rescuing the financial system and its constituents – at extreme costs to taxpayers – whilst pay practices in the City of London, Wall Street and other major financial centres seemingly remained largely unaffected.