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Financial regulations in Britain have imposed a rather unusual rule on the bosses of big banks. Starting next year, any guaranteed bonus of top executives could be delayed 10 years if their banks are under investigation for wrongdoing. The main purpose of this “clawback” rule is to hold bankers accountable for harmful risk-taking and to restore public trust in financial institution. Yet officials also hope for a much larger benefit: more long term decision-making not only by banks but also bu all corporations, to build a stronger economy for future generations.
“Short-termism” or the desire for quick profits, has worsened in publicly traded companies, says the Bank of England’s top economist. Andrew Haldane. He quotes a giant of classical economies, Alfred Marshall, in describing this financial impatience as acting like “Children who pick the plums out of their pudding to eat them at once” rather than putting them aside to be eaten last.
The average time for holding a stock in both the United States and Britain, he notes, has dropped from seven years to seven months in recent decades. Transient investors, who demand high quarterly profits from companies, can hinder a firm’s efforts to invest in long-term research or to build up customer loyalty. This has been dubbed “quarterly capitalism”。
In addition, new digital technologies have allowed more rapid trading of equities, quicker use of information, and thus shortens attention spans in financial markers. “There seems to be a predominance of short-term thinking at the expense of long-term investing,” said Commissioner Daniel Gallagher of the US Securities and Exchange Commission in speech this week.
In the US, the Sarbanes-Oxley Act of 2002 has pushed most public companies to defer performance bonuses for senior executives by about a year, slightly helping reduce “short-termism.” In its latest survey of CEO pay, The Wall Street Journal finds that “ a substantial part” of executive pay is now tied to performance.
Much more could be done to encourage “long-termism,” such as changes in the tax code and quicker disclosure of stock acquisitions. In France, shareholders who hold onto a company investment for at least two years can sometimes earn more voting rights in a company.
Within companies, the right compensation design can provide incentives for executives to think beyond their own time at the company and on behalf of all stakeholders. Britain’s new rule is a reminder to bankers that society has an interest in their performance, not just for the short term but for the long term.
analysis
Financial regulations in Britain have imposed a rather unusual rule on the bosses of big banks.
British economic laws of the boss of the big banks had an unusual constraints
Starting next year, any guaranteed bonus of top executives could be delayed 10 years if their banks are under investigation for wrongdoing.
After starting next year, executives of any fixed bonus will be delayed to ten years, if their banks are under investigation wrongdoing
The main purpose of this “clawback” rule is to hold bankers accountable for harmful risk-taking and to restore public trust in financial institution.
The main purpose of "clawback" rules in order to stabilize the bankers responsible for the harmful risks of new and regain public trust in financial institutions
Yet officials also hope for a much larger benefit: more long term decision-making not only by banks but also bu all corporations, to build a stronger economy for future generations.
White-collar office is also hoping to get greater benefits, more long-term decisions not only between banks, but also companies, are designed to give future generations to create a more robust economy
“Short-termism” or the desire for quick profits, has worsened in publicly traded companies, says the Bank of England’s top economist. Andrew Haldane.
"Short-term" or desire for quick gain, the company has been publicly traded deterioration, a top economist from the UK security Zhu Haldane says
He quotes a giant of classical economies, Alfred Marshall, in describing this financial impatience as acting like “Children who pick the plums out of their pudding to eat them at once” rather than putting them aside to be eaten last.
He cited a classic economic giant, Alcatel was Fred Marshall, used to describe this economic impetuous, like a plum out of the pudding and eaten immediately rather than put aside the children to eat slowly
The average time for holding a stock in both the United States and Britain, he notes, has dropped from seven years to seven months in recent decades.
The average duration of the United States and Britain hold shares, he pointed out, it has fallen from seven in seven months between the last ten years
Transient investors, who demand high quarterly profits from companies, can hinder a firm’s efforts to invest in long-term research or to build up customer loyalty.
Temporary investors need to get high returns from the company's long-term investigation, it would undermine the influence of a company used to make long-term investments or to build customer loyalty of
This has been dubbed “quarterly capitalism”。
This was dubbed the "quarterly capitalism"
In addition, new digital technologies have allowed more rapid trading of equities, quicker use of information, and thus shortens attention spans in financial markers.
In addition, new digital technology allows for faster stock trading, using the information faster, thus shortening the range of financial concerns marker
“There seems to be a predominance of short-term thinking at the expense of long-term investing,” said Commissioner Daniel Gallagher of the US Securities and Exchange Commission in speech this week.
Short-term thinking on long-term cost of the investment looks a dominant position, the United States Securities and Exchange Association Ze Daniel Greer said in this week's meeting
In the US, the Sarbanes-Oxley Act of 2002 has pushed most public companies to defer performance bonuses for senior executives by about a year, slightly helping reduce “short-termism.”
In the United States, the 2002 Sarbanes-Oxley Art Exhibition has put most public company executives bonuses delayed for about a year, slightly to help reduce short-term investments
In its latest survey of CEO pay, The Wall Street Journal finds that “ a substantial part” of executive pay is now tied to performance.
In the latest survey of CEO pay, the Wall Street Journal found that most managers now pay linked to performance and
Much more could be done to encourage “long-termism,” such as changes in the tax code and quicker disclosure of stock acquisitions.
Like the tax code and faster public stock purchase such changes should be faster to encourage long-term investment
In France, shareholders who hold onto a company investment for at least two years can sometimes earn more voting rights in a company.
In France, the investment holding company of the shares of holders of at least two years more to get more voting power in the company
Within companies, the right compensation design can provide incentives for executives to think beyond their own time at the company and on behalf of all stakeholders
Within the company, power incentive compensation design managers to think beyond their own time and the company on behalf of all holders of shares
Britain’s new rule is a reminder to bankers that society has an interest in their performance, not just for the short term but for the long term.
Britain's new system is a notification to the banker, society needs to find interest in their performance, rather than blindly do not just short-term investment but long term investment