Boards of directors, or their compensation committees, should regularly review the design and functioning of the firm’s incentive compensation practices to ensure their consistency with safety and soundness. In developing these principles, we were guided by two key considerations. The first, as I noted earlier, is that problematic compensation practices were not limited to the most senior executives at financial firms.
Traders with large position limits and loan officers who, as a group, originate loans accounting for a material amount of an organization’s credit risk, are two examples of non-executive personnel who have the ability to expose a banking organization to material amounts of risk.