Pay Structures in European Banks

The aim of this chapter is to provide an understanding of trends in executive compensation and establish a connection between ongoing policy reforms and executive pay structures in European banks. The section “Theoretical Background” discusses the theoretical background behind executive compensation and its implication for the banking industry. The next section, “The Structure of Managerial Compensation”, discusses the various components of executive compensation. Following on, “Impact of European Policy Developments on Pay Characteristics” assesses the link between recent policy developments and academic research, and the section “Contrasting Compensation Reforms in the US to the European Approach” contrasts the regulatory approach followed in the US to that in Europe. “Are there costs Associated with Regulating Executive Pay?” highlights some of the unintended consequences of cross-country differences in pay rules. The “Conclusion” draws the chapter to a close.