Tough Talk on Pay and Risk

Today, the Wall Street Journal reported that Goldman Sachs' CEO Lloyd Blankfein called on financial institutions and regulators to take a tougher approach to link compensation and risk taking.  Here's what he had to say in a speech yesterday to the Council of Institutional Investors.

When deciding on pay for traders, bankers and other employees, Wall Street firms should take into account not only the contribution the employee made to profit or loss, but also the risks taken and the overall contribution to the better functioning of markets. The evaluation "must be made on a multiyear basis to get a fuller picture of the effects of an individual's decision," Mr. Blankfein added. Regulations should get tougher in bull markets, he added, much like the Federal Reserve tries to keep the economy from overheating, he said.

This is a refreshing point of view from one of the top CEOs.  It remains to be seen if other top executives will view the situtation in a similar light.