Federal Reserve Board Executive Compensation Guidance

The Federal Reserve Board (the "FRB") has issued proposed guidance for banking organizations regarding their executive incentive compensation policies. The goal is to ensure that the incentive compensation packages of banking organizations do not encourage excessive risk-taking. The proposed guidance provides the following three general principles, which should be true of all incentive compensation arrangements:

• Arrangements should provide employees with incentives that do not encourage excessive risk-taking beyond the organization's ability to effectively identify and manage risk;
• Arrangements should be compatible with effective controls and risk management; and
• Arrangements should be supported by strong corporate governance, including active and effective oversight by the organization's board of directors.