Compensation and Risk – The Directors’ Responsibility

Executive Summary Bank directors today have an increased fiduciary duty to assess and manage the relationship between risk and compensation programs.  Regulations resulting from the financial crisis require boards (and their compensation committees) to formally assess and document the relationship between risk and compensation programs for all employees, not just executives.  As a result, board members need to be more involved, informed and knowledgeable about the bank’s compensation programs while ensuring the programs support sound risk management practices and comply with new regulations.  The first step is to develop a process where the roles and responsibilities of management, the board...