Mon, 28 May 2012
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Has the bonus as a necessary incentive for top bankers passed its prime? The phenomenon may be cast in stone in the United States, but Dutch bankers are starting to have doubts.Social psychologist David de Cremer interviewed 15 Dutch top bankers and exposed the myth of the bonus.
Cremer, now a professor in Behavioural Business Ethics at the Erasmus University in Rotterdam and at the London Business School, asked the bankers who they would most trust with their own savings.
“We gave them a choice between two bankers: banker A, who is working to promote his own self-interest and his bonuses, and banker B, who is interested in banking and wants to provide service. Each banker, each senior CEO, chose banker B. And the irony of it is that they usually hire banker A as a result of a self-created conviction.”
Necessary incentive
So it seems when their own money is involved, top bankers do not believe in smooth operators with top salaries, but in old-fashioned service-oriented bankers who love their profession.
Answering the question on incentives and bonuses the top bankers replied that they don’t regard bonuses as an incentive themselves, but continue to believe bonuses are a necessary incentive to others.
But more and more critical voices are being heard in bankers’ circles.
Rutger van Nouhuys, director of the business division of the new ABN AMRO, recently indicated the bank wants to become the Netherlands’ number one business bank. However, they cannot spend as much on salaries as they would like because Finance Minister Wouter Bos has reduced and frozen both bonuses and fixed salaries. Mr Nouhuys said that, despite the wage reduction, he did not have a problem keeping top talent on board. So here is a top banker saying his staff will not leave anyway.
Temporary check
De Cremer says bankers are not aware of the myth they themselves have created. The British newspaper Financial Times recently quoted other research which suggested that bonuses don’t make managers any happier and therefore form no incentive.
The Bureau for Economic Policy Analysis concluded in a report that top managers do not switch jobs quicker as a result of promises of huge bonuses.
According to De Cremer, managers need to be woken up to the fact that the bonus story is a myth because the rules now being imposed by politicians are only a temporary check on the phenomenon. “We need to convince them it’s a myth - they themselves must stop wanting it”.
Radio Netherlands World
Photo credit: Great Beyond
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