Preview

Whether There Should Be Enforcement Lim

Satisfactory Essays
Open Document
Open Document
680 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
Whether There Should Be Enforcement Lim
Whether there should be enforcement limits placed on the bonuses that can be earned by employees of financial institutions

Introduction
With the gradual recovery of economy, people began to realized that the improper system of bonuses payment for the financial institutions employees may be one of the main reasons that caused this global financial crisis. So whether the bonuses should be capped have became a very controversial question.

Bonuses limit can help
The culture of high bonuses has some bad effects for the financial institutions and the market. “The high bonus means that anything between 30% and 70% of yearly revenues are diverted to employees rather than being paid out to investors or reinvested in the business. And the lure of big payout may encourage the employees to take risks with banks' and clients' money.” (Guerrera and Francesco,2013)

Withe the limitation of the bonuses,the negative effects of the high bonuses present above can be significantly reduced. And the limitation on bonus can makes the leading function of salary become more obvious and effective. This helps the financial institutions do better in company management and risk control.

On the other hand, the limit of bonus can also help in solving the time-lag problem between risk disclosing and bonus acquiring. There is a time-lag in risk between happening and being exposed. While the employees always get paid on the current period. So there is no such time lag on the salary acquisition process. Such condition may cause some employees ignore the potential risk of the institution once the get the payment. Previously,the bank trader can get high bonus just rely on the good performance on short-terms while the risk and losses from long-term investment are undertaken by shareholders and taxpayers , So set a limitation on bonus helped to keep the balance and reduce the risk between the salary payment period and the risk disclosure period.

Some irregular operation of credit banks were seen

You May Also Find These Documents Helpful

  • Better Essays

    Tv Advertisement Room 101

    • 659 Words
    • 3 Pages

    Banks have made millions and indeed Billions of pounds in profit over the last 20 years at many peoples expense, through overblown interest charges and mortgage default payments for example. The top tie within these firms are paid gross bonuses and wages, that is extreme in an area of business.…

    • 659 Words
    • 3 Pages
    Better Essays
  • Best Essays

    Rwt 1

    • 3982 Words
    • 16 Pages

    Performance based compensation plans are monetary rewards that are based on individual performance. The performance norms are based on general ideas of what is acceptable for each job position no matter if the goal is too high or too low for the employees in that position. Bonuses are paid out on a regular basis. Each job goal can be easily manipulated by employees by downplaying job responsibility. This plan has a tendency to encourage risk taking by employees. It can be seen as acceptable to cut corners to increase bonus size. In my opinion this is not the appropriate plan for ABC Manufacturing Co., Inc.…

    • 3982 Words
    • 16 Pages
    Best Essays
  • Better Essays

    -Equal wages for the employees with same qualification, experience doing the same job. Bonus is fixed according to proper performance based measurements.…

    • 1610 Words
    • 7 Pages
    Better Essays
  • Powerful Essays

    Ethics Paper--Bailout

    • 1783 Words
    • 8 Pages

    It stands to reason to ask: Is it ethical for companies who have benefited from government bailouts to reward themselves with bonuses? Answering this question is not simple. The ethical dilemma pits the sanctity of bonus contracts against the American government’s interest in maintaining a stable economy. Companies fear losing crucial employees if bonuses are cut too deeply. Critics of bailout bonuses, such as Sen. Olympia Snowe (R-Maine), ask: “Bonuses for what?” (Johnston, para 13). The question is commonly asked because these “crucial” executives are ironically seen as the likely culprits responsible for the ongoing financial crisis. On the other hand, proponents argue that interfering with the bonuses constitutes a violation of “sacred” contracts (Collins, para 4). Although there may be legal claims to bonuses, some of their moral aspects do not stand to scrutiny. This ethical dilemma can be best understood by applying ethical standards such as the Rights and Common Good Approaches.…

    • 1783 Words
    • 8 Pages
    Powerful Essays
  • Better Essays

    Bonuses are a wonderful thing to show appreciation to the employees and their families; there is no doubt in that matter what so ever. It becomes an issue when the bonuses/pay increases awarded are out of the company’s financial means. The company should take the amount they are able to set aside and compare to the amount of employees that are employed. This amount should change as the amount of profit that the company acquires changes. If the company is not having a good financial income then the bonus amount should drop or not be given. Bonuses are not a mandatory requirement for the company to provide unless a legal contract has been signed. This is a benefit/privilege that a company can offer in appreciation to one’s work and dedication to the company.…

    • 1582 Words
    • 7 Pages
    Better Essays
  • Good Essays

    Executive Pay

    • 313 Words
    • 2 Pages

    It would be highly important for shareholders to connect closely as is possible to management and the available information about employee performance, and the compensation for that performance. I would recommend encouraging executives to make business decisions that will benefit shareholders’ by offering incentives for meeting performance goals. For instance, offering stock options as an incentive could discourage top-level management from keeping profits or bonuses acquired from sell of company…

    • 313 Words
    • 2 Pages
    Good Essays
  • Satisfactory Essays

    Accounting for Business

    • 379 Words
    • 2 Pages

    |Ethical Issues | |The impact of a bonus incentive scheme on the | | |…

    • 379 Words
    • 2 Pages
    Satisfactory Essays
  • Good Essays

    Pay for Performance

    • 1107 Words
    • 5 Pages

    Most managers get short-term bonuses and long-term incentives in addition to salary.50 For firms offering short-term incentive plans, virtually all 96% provide those incentives in cash. For those offering long-term incentive plans, about 48% offer stock options. These aim to motivate and reward management for long-term corporate growth in shareholder value. The size of the bonus (in terms of percentage of salary) is usually greater for top-level executives (Dessler). Often times top level management incentives are just a bit too much. They are given large stock options, cash bonuses, and other high price incentives and often times they take advantage of the situation. Enron executives are a great example of taking advantage of a good thing. This is just one down fall of the incentive program, another issue would be employee moral decrease because they often times feels like management should not receive such large rewards…

    • 1107 Words
    • 5 Pages
    Good Essays
  • Good Essays

    3.When the bonus is tied to the short-run earnings of the manager’s firm, then the bonus declines even if the manager did everything he or she could do in the midst of an economic downturn. Accordingly, bonus pay should relate to the performance of other comparable companies for a longer period to remove any incentive to boost short-term cash flows at the expense of long-term profitability. The bonus is designed for mangers that exceed their industry averages over the last several years.…

    • 1094 Words
    • 5 Pages
    Good Essays
  • Better Essays

    4. P. M. Healy, "The effect of bonus schemes on accounting decisions," Journal of Accounting and Economics, vol. 7,…

    • 1076 Words
    • 5 Pages
    Better Essays
  • Better Essays

    Pummeled by the bind of a painful recession and furious over oversized executive compensation packages at the very Wall Street firms widely blamed for the economic chaos, they gradually distrust key establishments and individual leaders. Americans are angered at the financial services region. They believe that these institutions have rigged the game so that top level executives are rewarded substantially even when they fail. Americans want action to restore fairness to the system and get pay back in line. The variety of experts and activists of political leaders and ordinary citizens, there is a belief that executive incentives have exaggerated short-term perfor¬mance, supported unnecessary risk-taking, and failed to discipline poor performance. Many believe that incentive plans have tempted some CEOs to put personal financial interests in front of good stewardship that provides the long-term interests of their organizations (Ethics Resource Center,…

    • 1089 Words
    • 5 Pages
    Better Essays
  • Good Essays

    Summary: Case Study

    • 818 Words
    • 4 Pages

    f. Year-end bonuses would be vulnerable to constructive dividend treatment, particularly if they are related to…

    • 818 Words
    • 4 Pages
    Good Essays
  • Satisfactory Essays

    Bonus does not have to be a fixed amount. It can be varied from year to year depending on the financial conditions of the firm. (Long, 2014)…

    • 258 Words
    • 2 Pages
    Satisfactory Essays
  • Good Essays

    The incremental bonuses should be satisfactory to employees and managers as well. The new plan is a business advantage because it wasn’t a large expense burden on the company. It’s motivating for the employees to receive monetary rewards and the company succeeds in being profitable and productive. References: Anthony, R. N., Hawkins, D.F. & Merchant, K.A. (2011). Accounting Text and Cases.…

    • 570 Words
    • 3 Pages
    Good Essays
  • Better Essays

    Engstrom Case Report

    • 957 Words
    • 1 Page

    bonuses that are not tied to cost savings, such as milestone and year end bonuses, should be…

    • 957 Words
    • 1 Page
    Better Essays