They’re Coming for Your Bonus. New limits on incentive pay—such as a seven-year claw back—will dampen risk-taking and growth.

The Wall Street Journal reports:

America’s economic recovery since the recession ended in 2009 has been the weakest in decades, principally because the 2010 Dodd-Frank financial law suppresses risk-taking. Now another Dodd-Frank rule—proposed restrictions on incentive pay in the financial industry—could be the coup de grace for U.S. growth.

The proposed restrictions have been agreed to by the six major financial regulatory agencies, including the Securities and Exchange Commission and the Federal Reserve, and would apply to thousands of executives and traders in the largest banks, asset managers, broker-dealers and others.


The new rules impose limits on incentive pay such as bonuses, and require that 60% of any incentive compensation be deferred for at least four years. Bonuses would also be subject to “claw back” by financial firms for up to seven years after being paid in the event of losses attributable to poor judgment or undue risk-taking by the recipient.

An article well worth your time.