Searching for perverse incentives that can become compliance land mines means messing with people’s pay.
Entries in Executive Compensation (11)
Consider a salesperson that has reached his bonus cap three months before fiscal year-end. Any achievement after that is not only unrewarded, but is actually penalized in the sense of creating higher future performance expectations and targets.
In recent years, the financial sector has produced one shocking scandal after another. The latest outrage came when news broke of how Wells Fargo’s cutthroat sales culture drove low-level employees to open more than two million unauthorized customer accounts.
Marc Hodak, an NYU Adjunct Professor and compensation consultant, spoke at the Ethical Systems event in New York a few weeks ago. He talked about “incentive time bombs,” where “bad behavior can hide behind good performance,” and how those behaviors can go unnoticed and unobserved by management until it’s too late.
It’s executive compensation season at shareholder meetings and corporate boardrooms across America, and pay for performance continues to be a hot topic.
You might expect corrupt companies to downplay and devalue the principles of market competition. In fact the opposite is true.
In a prior post on the FCPA Blog, Alison Taylor said corporate culture is hard to measure and “has been largely neglected by regulators and the anti-corruption-consulting industry.” Reflecting on her work, I said bad behavior (including my own) can truly become a compliance lesson learned. But I offered no way forward.
June 6 is the U.S. Securities and Exchange Commission's 80th birthday. It's a good reason to revisit the agency's role in regulating the world's biggest securities market and the varying interpretations of its mission.