Transcription of FSF Principles for Sound Compensation Practices
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FSF Principles for Sound Compensation Practices
FINANCIAL STABILITY FORUM FSF Principles for Sound Compensation Practices 2 April 2009 FINANCIAL STABILITY FORUM FSF Principles for Sound Compensation Practices Table of Contents 1 I. 2 1. Effective governance of Compensation .. 2 2. Effective alignment of Compensation with prudent risk taking .. 2 3. Effective supervisory oversight and engagement by stakeholders .. 3 II. Commentary on the Principles .. 4 Annex Members of the FSF Compensation FINANCIAL STABILITY FORUM 1 Introduction1 Compensation Practices at large financial institutions are one factor among many that contributed to the financial crisis that began in 2007. High short-term profits led to generous bonus payments to employees without adequate regard to the longer-term risks they imposed on their firms. These perverse incentives amplified the excessive risk-taking that severely threatened the global financial system and left firms with fewer resources to absorb losses as risks materialised.
FINANCIAL STABILITY FORUM 2 I. Principles The FSF Principles for Sound Compensation Practices aim to ensure effective governance of compensation, alignment of compensation with prudent risk taking and effective supervisory
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