Bonus system (compensation scheme)

Performance-related remuneration customary for employees in the financial sector. – In the course of the subprime crisis and the ensuing financial crisis, this form of income came under heavy criticism because it creates incentives to enter into high-risk commitments for the sake of short-term success, which runs counter to the principle of sustainability, even in the case of financial investments. – The state has intervened in the bonus system with various measures, including – in the UK and France – a very high tax on bonuses paid out. However, economists and lawyers have objected to this for a variety of reasons, not least because of tax system considerations. It is not the income as a whole that is subject to taxation here, but individual components of the salary. In addition, it was criticized that employees of an industry were being held in kin liability, especially those earning medium salaries in a bank who had done good work. In a reasonable comparison it was argued that the ward sister (charge nurse) would not have his salary reduced if the chief physician had operated badly. – However, on July 7, 2010, the European Parliament passed regulations stipulating that from 2011, only thirty percent of bonuses may be paid out immediately. In the case of variable compensation, a cap of twenty percent was even imposed on immediate payment. In the future, banks will only be allowed to pay out a large portion of variable compensation after a period of at least three years, and only if the transaction carried out by the recipient has proven successful.- See bank scolding, bonus, bonus cap, Citigroup bonus system, InstitutsVergütungsverordnung (Remuneration Ordinance for Institutions), hot spot, shitstorm, compensation system, advance review, Versicherungs-Vergütungsordnung (Remuneration Ordinance for Insurance Companies). Executive Board compensation, lemon trading.

Attention: The financial encyclopedia is protected by copyright and may only be used for private purposes without express consent!
University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
E-mail address: info@ekrah.com
https://de.wikipedia.org/wiki/Gerhard_Ernst_Merk
https://www.jung-stilling-gesellschaft.de/merk/
https://www.gerhardmerk.de/