Munich Personal RePEc Archive

Average Pay in Banks: Do Agency Problems and Bank Performance Matter?

Harkin, Sean M. and Mare, Davide S. and Crook, Jonathan N. (2017): Average Pay in Banks: Do Agency Problems and Bank Performance Matter?

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Abstract

We study the determinants of average pay across all levels of staff seniority for UK banks between 2003 and 2012. We show that pay is affected by agency problems but not by bank operating performance. Average pay does not depend on accounting outcomes at the bank level. By contrast, average pay is positively affected by the presence of a Remuneration Committee and the proportion of Non-Executives on the Board. These findings indicate that bank pay is determined by agency issues, not bank accounting performance. Our results have practical implications for bank shareholders and regulators, suggesting the need for greater transparency in governance of bank pay.

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