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Discussions in Europe on Variable Compensation in the Financial Sector. EU Centre Singapore Working Paper no. 20, February 2014

Hengel, Ruben van den (2014) Discussions in Europe on Variable Compensation in the Financial Sector. EU Centre Singapore Working Paper no. 20, February 2014. [Working Paper]

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    Abstract

    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.

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    Item Type: Working Paper
    Subjects for non-EU documents: EU policies and themes > Policies & related activities > economic and financial affairs > general
    EU policies and themes > Policies & related activities > economic and financial affairs > financial crisis 2008-on/reforms/economic governance
    Subjects for EU documents: UNSPECIFIED
    EU Series and Periodicals: UNSPECIFIED
    EU Annual Reports: UNSPECIFIED
    Series: Series > National University of Singapore, EU Centre > Working Papers
    Depositing User: Unnamed user with email kms214@pitt.edu
    Official EU Document: No
    Language: English
    Date Deposited: 07 Apr 2015 15:19
    Number of Pages: 8
    Last Modified: 07 Apr 2015 15:19
    URI: http://aei.pitt.edu/id/eprint/63493

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