Americans are fed up with the excessive compensation and lack of
integrity of top corporate managers, according to the latest data from
Booth/Kellogg School Financial Trust Index. The overall index's
collective measure of trust held steady at 24 percent.
The quarterly survey-which has been tracking trust across key financial
institutions for the last five years - included in the latest report
sentiment about several multi-billion dollar penalties paid out last
year by JP Morgan Chase.
Sapienza, the Merrill Lynch Capital Markets Research professor of
finance at Kellogg
School of Management at Northwestern University, and Luigi
Zingales, the Robert C. McCormack Professor of Entrepreneurship and
Finance and the David G. Booth Faculty Fellow of the University
of Chicago Booth School of Business, conducted the survey between
December 18, 2013 and December 26,2013, about a month after two of
JPMorgan's settlements were announced.
Even in the wake of these penalties and settlement, the bank announced
that overall compensation for employees, including top management, will
remain the same this year, which was unsettling for a vast majority of
those surveyed: A whopping 70 percent of respondents answered "no" to
the question "Do you feel it is fair that managers will not have to give
back any compensation for their mistakes?" with 26 percent responding
"This is a clear indication that accountability on the part of corporate
leaders does matter to Americans. Their integrity - or lack thereof - is
something people care about," Sapienza said.
In addition to the compensation issue of JPMorgan Chase top management,
Americans also feel strongly that corporations are held accountable for
"In November, JPMorgan paid out a $13 billion penalty to the Justice
Department, and another $4.5 billion in a separate settlement with
institutional investors. We found that 48 percent of people believe that
JPMorgan should have been required to pay more in penalties and
settlements than they did, with 32 percent being satisfied with the
amount paid for their mistakes, and 11 percent believing that the bank
was 'unfairly targeted' for their actions," Zingales adds.
These results corroborate research conducted by Sapienza and Zingales,
showing that a firm's integrity directly affects profitability. In the
study, titled "The Value of Corporate Culture," the researchers found
that companies that are perceived by their own employees to value ethics
- but not necessarily those that advertise their ethical culture to
outsiders - showed higher profits and other indicators of strong
ABOUT THE SURVEY: The survey was conducted for the Financial
Trust Index by Social Science Research Solutions (www.ssrs.com),
an independent research company, from December 18, 2013 to December 26,
2013, via telephone. A total of 1,020 individuals who make household
financial decisions were interviewed, with a margin of error for total
respondents of +/-3.65 % at the 95% confidence level.
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