The hubris of excessive remuneration in the financial sector: The case for regulation

A case is put for the regulation of excessive remuneration in the financial sector in its three forms: basic pay, bonuses and golden parachutes. It is suggested that the financial sector commands a big portion of corporate profit that is disproportional to its share of the economy, which invalidates the profitability argument for big pay. It is demonstrated that bonuses and golden parachutes have nothing to do with performance and that for too-big-to-fail institutions, bonus payments are more strongly correlated with bail-out money than performance, no matter how performance is measured. The arguments against the regulation of remuneration are rebutted. It is concluded that a radical solution to the problem associated with big pay is to place the financial sector where it should be by putting an end to excessive financialisation.