May 20, 2011
I’m writing because my family and I were affected by the economic collapse of 2008, and we don’t want it to happen again.
Wall Street greed and outrageous pay practices were a major cause of the collapse. One way to change the incentives so they don’t collapse our economy again would be for regulators to use a *safety index* for incentive compensation, instead of a profit index.
Currently, most bankers receive stock options. So if they can generate more profits, the stock price goes up, and their options become more valuable.
Instead, what if they used the bank’s bond price, which measures the overall ability of the bank to repay its own debt? Another measure of bank stability is the spread on credit default swaps (the insurance-like policies that are essentially bets, where one gambler bets with another that a particular firm will fail). The closer a bank comes to failing (such as in failing to pay of its bond debt), the bigger the spread on credit default swaps.
Another way to do this would be to on;y allow compensation in direct correlation with the amount of jobs, actual US revenue, and economic development that corporations and their CEO's are creating. I also don't believe that CEO's should be allowed perks such as club memberships, trips that include family, and stick options without having tax consequences or that they should make more than 200 times what their lowest paid worker is paid.
Thank you for considering my comment,
Vicki Jacobson