Professor William Black:

Yes, it should be run consistent with all the literature on how it should be done. All the literature from people of all ideological persuasions says it should be ultra long term so you get in off a living wage and then in the US context you can send one's kid to university. Ours are expensive. However, beyond that, the big kill comes not two years, but ten years down the line. You show sustained performance that is real for at least a decade. That is what all the literature, again by Nobel laureates, on this subject says. We simply do not run executive compensation in accordance with what we purport. We purport that we align the interests with the shareholders but we distinctly do the opposite. That is at the high end. At the lower end, never ever set banker compensation for, say, loan officers based on volume. We have known for centuries that this will produce a disaster. There is no upside to that. It should always be weighted with quality and people's bonuses should be deferred to establish that they were making quality loans, not simply volume loans.

In particular, the PPI is an unbelievable disgrace. This was a product, again according to the testimony in the parliamentary inquiry in the UK, that had an 80% mark up. They talk about unsuitable and while some people could never recover under the policy, it was unsuitable for everyone. It was a pure, rip-off product and they created incentive structures that ensured that it was not just money, but it was also about the humiliation of people who refused to do the wrong thing. That should never be allowed at all. The dollar amount does not matter.