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Student’s Article on Executive Compensation to be Published in UC Davis Law Journal

August 01, 2013

Jesse Gossett 3L will have an article titled “Financial Institution Executive Compensation: The Problem of Financially Motivated Excessive Risk-taking, the Regulatory Response, and Common Sense Solutions” published in an upcoming issue of the UC Davis Business Law Journal.

In his article, Gossett examines the economics of compensation and its relationship to risk-taking at financial firms. He takes a critical look at compensation provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and to a lesser extent the Sarbanes-Oxley Act. He makes specific recommendations for rules regulators should adopt under Dodd-Frank for the purpose of using compensation plans as a way of reducing excessive risk at financial institutions. 

“This article is particularly timely because Dodd-Frank requires regulators to adopt rules prohibiting compensation plans that encourage excessive risk-taking as a way of reducing the likelihood of another financial meltdown,” said Gossett. “However, no such rules have been adopted and the financial industry has largely returned to its former ways.”

“The real issue was how does compensation play into risk taking,” he continued. “You have to take risk, but you don’t want a system that encourages foolish decisions. The real issue is about adding the incentive to acknowledge that just because a decision could make you a lot of money doesn’t mean it’s a good decision. You need to consider the consequences to other people.”

Gossett, the editor-in-chief of the USF Law Review, makes his recommendation based on his 20 years of experience in financial services and his training as a chartered financial analyst (CFA).

“This is why I went to law school,” Gossett said. “I saw there were definite issues with our system, and when the financial crisis hit, I wanted to think about my part in our financial system. I wanted to make the financial system there for everyone and function for everyone in a way so they can succeed.”

William Stanger, the editor-in-chief of the UC Davis Business Law Journal, said articles by non-UC Davis law students are published only once or twice a year. “Gossett stood out from the crowd with his additional qualifications, prior experience, and selection and treatment of a timely, interesting topic,” Stanger said.