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The hubris of excessive remuneration in the financial sector: The case for regulation

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  • Imad A. Moosa

    (RMIT)

Abstract

A case is put for the regulation of excessive remuneration in the financial sector in its three forms: basic pay, bonuses and golden parachutes. It is suggested that the financial sector commands a big portion of corporate profit that is disproportional to its share of the economy, which invalidates the profitability argument for big pay. It is demonstrated that bonuses and golden parachutes have nothing to do with performance and that for too-big-to-fail institutions, bonus payments are more strongly correlated with bail-out money than performance, no matter how performance is measured. The arguments against the regulation of remuneration are rebutted. It is concluded that a radical solution to the problem associated with big pay is to place the financial sector where it should be by putting an end to excessive financialisation.

Suggested Citation

  • Imad A. Moosa, 2017. "The hubris of excessive remuneration in the financial sector: The case for regulation," Journal of Banking Regulation, Palgrave Macmillan, vol. 18(4), pages 287-301, November.
    • Handle: RePEc:pal:jbkreg:v:18:y:2017:i:4:d:10.1057_s41261-016-0027-7
    DOI: 10.1057/s41261-016-0027-7
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    References listed on IDEAS

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    1. Imad A Moosa, 2016. "Contemporary Issues in the Post-Crisis Regulatory Landscape," World Scientific Books, World Scientific Publishing Co. Pte. Ltd., number 10024, October.
    2. Dietl, Helmut M. & Duschl, Tobias & Lang, Markus, 2011. "Executive Pay Regulation: What Regulators, Shareholders, and Managers Can Learn from Major Sports Leagues," Business and Politics, Cambridge University Press, vol. 13(2), pages 1-30, August.
    3. Kevin Dowd, 2009. "Moral Hazard and the Financial Crisis," Cato Journal, Cato Journal, Cato Institute, vol. 29(1), pages 141-166, Winter.
    4. Frank Levy & Peter Temin, 2007. "Inequality and Institutions in 20th Century America," NBER Working Papers 13106, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Jan Libich & Liam Lenten, 2022. "Hero or villain? The financial system in the 21st century," Journal of Economic Surveys, Wiley Blackwell, vol. 36(1), pages 3-40, February.

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