Ethical Innovation in Business and the Economy
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Ethical Innovation in Business and the Economy

Edited by Georges Enderle and Patrick E. Murphy

Innovation has become a buzzword that promises dramatic changes in almost every field of business. Absent from this attention is a serious discussion of the ethical sides of dramatic change. To address this, editors Georges Enderle and Patrick E. Murphy gather a team of experts to fully examine the ethics of innovation within business and the economy in this standout addition to the Studies in TransAtlantic Business Ethics series.
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Chapter 9: Innovation in financial industry executive compensation practices: lessons of the ‘London Whale’ trade for Volcker Rule implementation

Michael A. Santoro


Chapter 9 by Michael A. Santoro focuses on executive compensation in the financial industry. It highlights the important role of cash-based incentive compensation in the financial crisis, which contributed to the failure of many firms and the accumulation of trillions of dollars of systemic risk. A brief survey then recalls important legal and industry-related reforms of executive compensation that have been undertaken to date in the United States and Europe. By examining the infamous London Whale trade of JPMorgan Chase, the chapter demonstrates the need for innovative approaches to linking executive compensation more closely to risk management and concludes with suggesting a number of elements for an innovative compensation system.

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