Discussions in Europe on variable compensation in the financial sector
Bonuses – which are often used to mitigate principal-agent problems and to encourage employees to work harder – have increased tremendously in the financial sector during the last decade, and have often been seen as a contributing factor to the financial crisis of 2008. The recent European Union (EU...
| Main Author: | |
|---|---|
| Other Authors: | |
| Format: | Working Paper |
| Language: | English |
| Published: |
2014
|
| Subjects: | |
| Online Access: | https://hdl.handle.net/10356/103872 http://hdl.handle.net/10220/19389 |
| _version_ | 1826119266819112960 |
|---|---|
| author | Hengel, Ruben van den |
| author2 | EU Centre in Singapore |
| author_facet | EU Centre in Singapore Hengel, Ruben van den |
| author_sort | Hengel, Ruben van den |
| collection | NTU |
| description | Bonuses – which are often used to mitigate principal-agent problems and to encourage employees to work harder – have increased tremendously in the financial sector during the last decade, and have often been seen as a contributing factor to the financial crisis of 2008. The recent European Union (EU) action to adopt a policy that restricts bonuses paid to bankers may seem promising at first, but this does not address the real issues behind variable rewards. Compensation policies should be changed to encourage responsible risk-taking and decision-making through the implementation of broader performance metrics, forfeitable holdbacks and hybrid bonds. Furthermore, a change in organisational culture is needed to improve ethical behaviour leading to a re-balancing of stakeholders’ interests in the financial sector. |
| first_indexed | 2024-10-01T04:57:25Z |
| format | Working Paper |
| id | ntu-10356/103872 |
| institution | Nanyang Technological University |
| language | English |
| last_indexed | 2024-10-01T04:57:25Z |
| publishDate | 2014 |
| record_format | dspace |
| spelling | ntu-10356/1038722020-09-26T21:51:44Z Discussions in Europe on variable compensation in the financial sector Hengel, Ruben van den EU Centre in Singapore DRNTU::Social sciences::Economic theory::Public finance Bonuses – which are often used to mitigate principal-agent problems and to encourage employees to work harder – have increased tremendously in the financial sector during the last decade, and have often been seen as a contributing factor to the financial crisis of 2008. The recent European Union (EU) action to adopt a policy that restricts bonuses paid to bankers may seem promising at first, but this does not address the real issues behind variable rewards. Compensation policies should be changed to encourage responsible risk-taking and decision-making through the implementation of broader performance metrics, forfeitable holdbacks and hybrid bonds. Furthermore, a change in organisational culture is needed to improve ethical behaviour leading to a re-balancing of stakeholders’ interests in the financial sector. 2014-05-20T05:40:12Z 2019-12-06T21:22:01Z 2014-05-20T05:40:12Z 2019-12-06T21:22:01Z 2014 2014 Working Paper Hengel, R. v. d. (2014). Discussions in Europe on Variable Compensation in the Financial Sector (EUC Working Paper, No. 20). Singapore: EU Centre. https://hdl.handle.net/10356/103872 http://hdl.handle.net/10220/19389 en EUC working paper, No. 20-14 © 2014 EU Centre in Singapore. 8 p. application/pdf |
| spellingShingle | DRNTU::Social sciences::Economic theory::Public finance Hengel, Ruben van den Discussions in Europe on variable compensation in the financial sector |
| title | Discussions in Europe on variable compensation in the financial sector |
| title_full | Discussions in Europe on variable compensation in the financial sector |
| title_fullStr | Discussions in Europe on variable compensation in the financial sector |
| title_full_unstemmed | Discussions in Europe on variable compensation in the financial sector |
| title_short | Discussions in Europe on variable compensation in the financial sector |
| title_sort | discussions in europe on variable compensation in the financial sector |
| topic | DRNTU::Social sciences::Economic theory::Public finance |
| url | https://hdl.handle.net/10356/103872 http://hdl.handle.net/10220/19389 |
| work_keys_str_mv | AT hengelrubenvanden discussionsineuropeonvariablecompensationinthefinancialsector |