96% of bank execs oppose government role in setting compensation parameters

Majority of bankers do not believe that government evaluation of executive compensation will reduce excessive risk-taking

CHICAGO, Feb. 17, 2010 – The majority of bank executives (96%) do not agree that the government should play a role in setting bank compensation parameters and guidelines, according to Grant Thornton LLP’s 17th Bank Executive Survey, conducted in conjunction with Bank Director magazine. In addition, when it comes to the government’s role in assessing risk, almost two-thirds (61%) of bankers do not believe that the requirement to evaluate compensation will reduce excessive risk-taking.

When it comes to the increased focus on enterprise risk management (ERM) and corporate governance, more than half (52%) of bank executives indicated that they intend to make changes to their bank’s existing risk management programs, with more larger banks (59%) than smaller (47%) planning to make changes. However, very few banks (33%) intend to implement new risk management programs and only 13% plan to employ additional staff to address the increased focus on ERM and corporate governance.

“With new Federal Reserve Board (FRB) initiatives and new regulatory guidance in place, banks will need to conduct in-depth reviews of their incentive compensation plans to ensure that their plans don’t result in unnecessary risk and impair shareholder value,” said Henry Oehmann, National Executive Compensation Services director. “At the same time, TARP regulations, the FRB guidance and new SEC disclosure rules have heightened the importance and public disclosure requirements regarding risk management in executive and incentive pay. While most of the banks surveyed have not noted this increased role, the federal regulators clearly see ERM as a key factor in executive and incentive pay practices.”

Impact on Current Compensation Programs
It appears that few banks believe that proposed executive compensation regulations and legislation will impact current compensation programs — only 21% of respondents plan to change their pay program over the next 12 months to reflect current and proposed legislation, with more large banks (34%) than small banks (13%) agreeing that they will change their pay programs.

Most respondents (84%) agree that executive pay programs should be evaluated based upon bank performance metrics — with slightly more large banks (87%) agreeing with the statement compared to small banks (82%).

Compensation and Recruiting
The majority of bankers (58%) believe that increased government involvement will negatively affect their ability to successfully retain and recruit good executive management. Notably, respondents from banks headquartered in the Southeast indicated agreement with this statement at a significantly higher rate (71%) than the other regions – Northeast (46%), Midwest (55%), Central (63%), and West (62%).



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About the Survey
Grant Thornton LLP and Bank Director magazine conducted this national survey of bank CEOs and CFOs from Nov. 17 through Dec. 3, 2009, with 246 respondents. Sixty-one percent of the respondents were from small banks (those with less than $500 million in estimated assets at the end of 2009), while the remaining 39 percent were from large banks (those with more than $500 million in estimated assets at the end of 2009). Regarding ownership structure, 37 percent report that they are public institutions, 42 percent are private and 21 percent are mutual. Visit www.GrantThornton.com/banksurvey.

About Grant Thornton LLP
The people in the independent firms of Grant Thornton International Ltd provide personalized attention and the highest quality service to public and private clients in more than 100 countries. Grant Thornton LLP is the U.S. member firm of Grant Thornton International Ltd, one of the six global audit, tax and advisory organizations. Grant Thornton International Ltd and its member firms are not a worldwide partnership, as each member firm is a separate and distinct legal entity.

In the U.S., visit Grant Thornton LLP at www.GrantThornton.com.