How are Bankers Paid?

We analyze compensation design in banks. Specifically, we document associations with firm characteristics, time-series trends, pay-for-performance sensitivities, performance based pay, and the sensitivity of firm-related wealth to changes in stock return and stock return volatility. We find a significant decrease in pay during the recent financial crisis and steady growth following the crisis. We find that bank CEO pay is sensitive to ROE and stock return, but not to ROA. Bank CEOs have lower delta and vega in recent years than they had prior to the financial crisis. They also have a larger portion of their pay tied to performance metrics in recent years relative to the pre-crisis period, but less pay linked to performance metrics than non-bank financial or non-financial CEOs. In terms of the level of pay, bank CEOs earn less than both non-bank financial and non-financial firm CEOs. The lower relative bank CEO pay is driven by lower salary, nonequity incentive and stock pay