Executive compensation refers to an employee’s total pay package, which can include base
salary, bonuses, company shares, and other financial benefits. Compensation packages are
generally used as a tool for attracting and retaining talent, as well as for rewarding performance.
Executive compensation practices came under great scrutiny as Americans struggled in
the economic downturn and were angered by what they saw as a Wall Street pay culture
that rewarded the excessive risk-taking that caused the recession. Financial firms that were
recipients of the Troubled Asset Relief Program (TARP) passed in 2008 were particularly
Since 2008, several new legislative and regulatory proposals have been announced to reform
compensation practices in the financial services industry. Many financial institutions proactively
made significant changes to their compensation policies and practices to better align pay
with long-term performance and effective risk management. It is also widely expected that
compensation levels will decrease as a reflection of the current, difficult economic environment.