The Fed Is Mulling A Rule Requiring Early Disclosure Of Deferred Compensation At Wall Street Firms And Banks

Friday, February 15, 2013 08:15
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The Fed Is Mulling A Rule Requiring Early Disclosure Of Deferred Compensation At Wall Street Firms And Banks

Tags: compensation | Federal Reserve | financials

The Federal Reserve is considering a rule requiring banks and securities firms to disclose compensation earlier, increasing transparency to investors on how and when firms pay their employees.
 
Wall Street firms have been increasingly deferring payment as a result of pressure to curb risk taking and cut costs.

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Last week, Morgan Stanley deferred the bonuses of thousands of highly paid employees. It will be 2016 before the bonuses are paid out in full.
 
Many companies utilize stock options and restricted stock to pad employee compensation but Wall Street firms rely heavily on deferred compensation to augment their employee pay.
 
Banks do not currently disclose how much compensation is deferred or how much is accounted for in costs as previous year’s deferrals are paid out.
 
European banks are more open about their employees’ deferred compensation and US firms do make extensive disclosures about top executives’ compensation packages—including restricted stock grants—in their annual reports.
 
For Wall Street firms, the portion of bonus-eligible compensation that was deferred increased from 40% in 2009 to 75% in 2011.

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